Vehicle Deductions including Gas and Mileage Deductions

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Most business owners want to deduct as much of their transportation costs as possible, but the IRS rules limit you to the “business use” of the vehicle. Despite these rules, it is possible to maximize your vehicle deductions based upon your documented use of the vehicle. Maintenance and gas deductions are permitted based upon the business use of the vehicle. If your vehicle is used 70% for business and 30% personal, you can deduct 70% of these costs. With proper mileage logs, you can get a mileage deduction, similar to reimbursing your employee for use of their personal vehicle.

Businesses and business owners need to deal with either the costs of travel, fleets of vehicles, or reimbursing employees for the use of their personal automobiles. The IRS has established strict and complicated rules regarding this deduction, to prevent abuse. But with the right record keeping, you can often write-off many of these expenses.

For personal vehicles partially “put into service” business purposes, the IRS permits you to deduct the portion of the cost that is used for business purposes. For employees that provide their own vehicle, it is customary to use the IRS mileage reimbursement rates to reimburse your employees for their use of the vehicle. For the use of your vehicle for charitable purposes, the IRS provides a separate, lower mileage rate that you can take as a deduction as part of your charitable giving rates. Depending on your usage pattern, different vehicle deductions may make sense for your tax strategies.

Many business owners buy their gas through their business, thinking that they are getting a gas deduction. Because vehicle deductions are based upon the business use of the vehicle, the gas and maintenance is deductible based upon usage. The IRS mileage deduction may be more advantageous but require better record keeping. Getting tax deductions for mixed use items like vehicles is a popular tax planning strategy for small business owners.

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