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Use Your Personal Car for Business? Deduct It

By Stephanie Rabiner, Esq. on April 08, 2011 | Last updated on March 21, 2019

Besides home offices, perhaps the most-asked question about small business tax deductions is whether or not you can deduct your personal car.

The short answer is yes, there is a car tax deduction for small businesses.

However, it requires a bit of recordkeeping and calculations on your part. You also actually have to use your vehicle for business (that darn pesky IRS Code).

It goes without saying that if a vehicle is used both for personal matters and business, you're going to have to keep track of business-related mileage and car expenses in order to take a car tax deduction. The depth of these records depends on how you want to calculate your small business tax deductions for the year.

You have two deduction choices: standard mileage or actual expenses.

Every year, the IRS determines a new business mile rate that is based on the average cost of transportation. For 2010, you may deduct 50 cents per business mile, which is actually down 5 cents from 2009.

Actual expenses are the more difficult car tax deduction. It allows you to deduct actual expenses plus depreciation. This includes maintenance, insurance, and a variety of other expenses.

The standard mileage calculation is clearly much easier, but it may not net you as large of a deduction as actual expenses would. However, actual expenses will require intense recordkeeping, and calculating what percentage of the car is used for business because you can only deduct that portion of overall expenses.

In the end, it's really a matter of choice and ease, but at the very least, you should be deducting something.

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