Business Use Of Vehicles - 2021 | Best Guide - CPA Clinics
The deduction for business auto expenses generally applies only to self-employed persons. Exceptions exist for Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials. Reimbursements under accountable plans are allowed.
If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. You also may be able to deduct other costs of local transportation and traveling away from home overnight on business. If you use your car or truck for business purposes, you can deduct expenses using either the standard mileage rate or actual expenses.
Note: You must claim the standard mileage rate in the first year if you want the option of claiming the standard mileage rate in later years.
Local transportation expenses include the ordinary and necessary costs of:
Local business transportation does not include expenses you have while traveling away from home overnight. Those expenses are deductible as travel expenses. However, if you use your car while traveling away from home overnight, use these rules to compute your car expense deduction.
Generally, your tax home is your regular place of business, regardless of where you maintain your family home. It includes the entire city or general area in which your business is located.
Generally, you cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. These costs are personal commuting expenses.
Your workplace can be your home if you have an office in your home that qualifies as your principal place of business. Therefore, daily transportation costs between home and another work location in the same trade or business are deductible.
Any use of a vehicle not used for business purposes is considered personal use and is not deductible. If you use a vehicle for both business and personal use, the percentage of use must be allocated.
Example: Billy is a contractor and drives his car 20,000 miles during the year: 12,000 miles for business use and 8,000 miles for personal use. Billy can claim only 60% (12,000 ÷ 20,000) of the cost of operating his car as a business expense.
Using the standard mileage rate eliminates the need to keep track of actual costs.
For 2021, the standard mileage rate for the cost of operating your car for business use is 56.0¢ per mile.
The standard mileage rate can be used to replace the actual cost of depreciation, lease payments, maintenance and repairs, gasoline, oil, insurance, and vehicle registration fees.
Cars for hire. The standard mileage rate can be used for cars used for hire, such as a taxi, Uber, Lyft, or ride share. Other rules that limit the use of the standard mileage rate still apply.
In addition to deducting the standard mileage rate, the following costs are also deductible.
To use the standard mileage rate for a car that is owned by the taxpayer, it must be used in the first year the car is available for business. In later years, the taxpayer can choose between either the standard mileage rate method or actual expenses. If you use the standard mileage rate, you cannot also deduct actual car expenses for that year.
You cannot use the standard mileage rate if you:
