The Vehicle Deduction: Who Can Claim it and How

By Greg Lindberg, 1800Accountant.com Writer

Driving a vehicle is something many of us do without putting much thought into it. From sedans to trucks to SUVs, we all have to transport ourselves from one location to another for various reasons. We also have to deal with the expenses associated with driving and maintaining a vehicle that can add up quickly over time. If you spend time behind the wheel for business reasons, however, have you explored the tax deductions on vehicle costs that you may be able to claim on your tax return?

The IRS offers a vehicle deduction that is often overlooked by self-employed taxpayers who may be eligible for it. To qualify for this beneficial write-off, you must use your car for business-related travel. The IRS has a few stipulations on what types of car trips qualify when calculating your deduction amount. If you drive your vehicle from a place of employment to another location to meet with clients or to partake in some other type of business activity, this trip would qualify under these rules. If you run a small business out of your home and you travel by car from your residence to another location for business reasons, the expenses of this trip would also qualify.

According to the federal tax code, there are two basic options you can choose from to write off car expenses on your tax return. You can either claim the vehicle deduction based on the number of miles you drive or the actual amount of expenses you pay to operate your vehicle. If you take the miles driven route, the standard mileage rate for 2013 is 56.5 cents per mile driven. If you go with the actual expenses option, you can include gas, oil changes, tolls, repairs, maintenance, and insurance when determining the specific amount you can claim as a write-off. It’s important to make the calculations for both options to figure out which one will provide you with the largest potential deduction amount to reduce your tax liability.

Bus drivers, taxi drivers, limo drivers, and truck drivers are just a few of the many occupations that require a substantial amount of time on the road. Keep in mind, however, that in order to claim vehicle-related costs as a deduction, you generally have to be a self-employed person, such as a small business owner or a 1099 contract worker. Individuals who hold W-2 positions with an employer and use their own vehicles for activities that are part of their jobs are normally not eligible to deduct these expenses. However, if your employer does not reimburse you for such costs, you may be able to claim them as a write-off for travel purposes under unreimbursed employee expenses on your tax return.

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About Bert Seither

Bert Seither is the VP of Operations at 1800Accountant, a national accounting and business development firm. For over a decade, Seither has assisted thousands of startup and well-established small businesses with their business development needs. He has assisted clients in a wide range of industries, enabling him to gain insight into a multitude of fields. He has gained the knowledge of tax reduction strategies, compliance, bookkeeping, payroll and business planning – all things he believes are instrumental to ultimately starting a small business that can grow over time. With his tremendous entrepreneurial drive, Seither has also started up some of his own small businesses, and he constantly draws on this experience when working with aspiring and current business owners. He has been featured in expert interviews on television networks ABC, NBC, and Fox.