If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. You generally can deduct either your actual expenses or the standard mileage rate.
Actual expenses. If you deduct actual expenses, you can deduct the cost of the following items:
| Depreciation | Lease Payments | Registration |
| Garage rent | Licenses | Repairs |
| Gas | Oil | Tires |
| Insurance | Parking Fees | Tolls |
If you use your vehicle for both business and personal purposes, then you must divide your expenses between business and personal use. You do this by keeping a mileage log. There is no definitive format for the log, but it must include the date, business purpose of trip (such as which clients you saw, went to the store to pick up office supplies, etc.) and the number of miles it took to go there and back to your office.
Example: You are the sole proprietor of a flower shop. You drove your van 20,000 miles during the year. 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. You can claim only 80% (16,000/20,000) of the cost of operating your van as a business expense.
Standard mileage rate. Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. You can use the standard mileage rate for a vehicle you own or lease. The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. It is announce annually by the IRS. To figure your deduction, multiply your business miles (from your mileage log) by the standard mileage rate for the year.
If you use the standard mileage rate, you cannot deduct your actual expenses except for parking fees, tolls, interest on your car loan, and certain state and local taxes. For the vast majority of people, the standard deduction will give you a greater deduction than the actual expenses.
Choosing the standard mileage rate. If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. In later years, you can choose to use either the standard mileage rate or actual expenses. If you use the standard mileage rate for car you lease, you must choose it use it for the entire lease period (including renewals).
Choosing the actual expenses. If you choose actual expenses the first year you put a vehicle in use, then you must use it every year thereafter. Also, if your business operates five or more vehicles (such as a limo, taxi, or delivery company), then you must use actual expenses.
For more information check out IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.