If you use your car or truck only for business, charity or medical purposes, you may deduct all costs of ownership and operation in your tax return. The amount of your deduction will depend on the number of miles you have spent driving for any of these tax-deductible purposes.
You can claim car and truck expenses using one of two methods: the actual expense method or the standard mileage rate method.
To use this method, you must compile all actual costs incurred in the operation of your vehicle. Then you must multiply this amount by the percentage of the vehicle’s business use.
For example, if the total vehicle expenses are $4,500 and the percentage of miles you drive that year for business purposes was 60%, then the vehicle-related expenses you can deduct in your return is $2,700 (calculated as $4,500 total expenses x .60 business use = $2,700 business expenses).
If you opt to use the actual expense method, you may deduct the following costs:
- Fuel expense
- Repair expense
- New tire purchases
- Insurance payments
- Licensing and registration fees
- Depreciation on our vehicle
Standard Mileage Rates
The other option you may use to figure your deduction is the standard mileage rates, which is such an easier way of calculating the percentage of the vehicle’s business use.
Unlike the actual expense method, this method does not require you to compile the entire expenses related to the operation of your vehicle. Rather, it only requires you to track your mileage for the tax year.
To calculate your deduction, simply multiply the standard mileage rate by the number of miles driven for business purposes.
Below you will find the standard mileage rates to use in calculating deductible costs of operating a car for business, charitable, medical, or moving expense purposes.
|2022||58.5 cents/mile||14 cents/mile||18 cents/mile|
|2021||56 cents/mile||14 cents/mile||16 cents/mile|
|2020||57.5 cents mile||14 cents/mile||17 cents/mile|
|2019||58 cents/mile||14 cents/mile||20 cents/mile|
Standard Mileage or Actual Expense, which should I use?
To choose between using actual expense or standard mileage, you should consider the type of vehicle you drive.
If you qualify to use both methods, we recommend calculating your deduction both ways to compare which gives you a larger deduction.
As a general rule, you should use the actual expense method if the following apply to you:
- You drive an old vehicle with high maintenance costs
- You drive a vehicle with poor fuel efficiency
- You drive an expensive car
On the other hand, you should use standard mileage if:
- You drive a newer vehicle with low maintenance costs
- You drive a vehicle with high fuel efficiency
- You drive an inexpensive vehicle
Where do I Deduct My Car and Truck Expenses?
There are several areas on your tax return where you can claim your car and truck expense deduction:
- Schedule A (line 1) if you use your vehicle for medical purposes.
- Schedule A (line 17) if you use your vehicle for a qualified 501(c)(3) charitable organization.
- Schedule A (line 21) if you are a W-2 (wage) employee and you use your vehicle for business purposes
- Schedule C if you are self-employed and are a sole proprietor or sole member LLC.
- Schedule F if you use your vehicle for farming or agricultural activities.
What Kind of Records do I Need to Keep?
Regardless of whether you use the standard mileage or actual expense method to claim car and truck expenses, you must keep a mileage log and also provide third-party mileage documentation, including odometer readings recorded by repair shops or vehicle inspections.
To accurately track your mileage, you must have two odometer readings: one from the beginning of the year and one from the end of the year. In the event you are audited, the odometer readings will allow the auditor to confirm the accuracy of your mileage record.
If you claim actual expenses, you should also keep all receipts and bills for your car expenses. You can also save bank and credit card statements, but the IRS prefers you to provide receipts and invoices.