When you own a car for your business, there are two different ways you can use the vehicle for tax related deductions for your business. You can either use the car mileage (for business miles only) or the actual expenses (for business useage only). These two ways are better defined below:
- Standard mileage rate: 55.5 cents per mile (2012 rate). You can deduct the 55.5 cents per mile for the mileage driven only for business plus parking fees and tolls for business only.
- Actual expenses: You can deduct all actual expenses related to the car (for business related purposes only) such as insurance, cost of the car, gas & oil, license, parking fees, registration, repairs, tires, tolls, and even garage rent.
Note you must choose one or the other. If you choose the actual expense method, you cannot change back to the standard mileage rate for that vehicle in later years. More can be found on the IRS website http://www.irs.gov/newsroom/article/0,,id=250882,00.html
Copyright Jeanine Pfeiffer