Do you use your personal vehicle to run errands for your business or to visit clients? If so, did you know that using your car for business could have some tax benefits?
Using your personal car for business can save you the cost of having to buy another vehicle. You don’t have to worry about where to store it since it lives at your house. And on top of all that, there are some tax benefits.
If you’re using a car for business purposes, some of the expenses you incur are tax-deductible. The trick is knowing which expenses are considered qualified expenses for your business.
Things like car maintenance and repairs, oil changes, gas, tires, licenses, registration and depreciation are all deductible expenses. You can also deduct parking fees and tolls, even if you use the standard mileage rate.
Any expenses incurred while using the vehicle for personal errands or trips aren’t deductible. So, if you take a road trip for fun, you can’t write off the gas for the trip. Also, you can’t deduct your miles from home to work, as that’s considered a personal expense.
Over time, cars depreciate in value. You might have bought a car for $20,000 about 10 years ago but only be able to sell it for $5,000 today. The IRS allows you to depreciate a car used for business.
The IRS can get pretty strict about checking financial records if there are any discrepancies or red flags. The best thing you can do to prevent an audit (or make one go smoothly) is to keep accurate records.
Employees Driving Company Cars
Another consideration is if your employees use their own cars for company activities, such as driving from one client to another or running errands for the company. Keep in mind you may be liable for them and their cars during business hours, depending on laws in your state.
Qualifying for the Standard Mileage Deduction
If you’d rather use the standard mileage deduction (it may be simpler than keeping track of all your business-related vehicle expenses), you must meet certain criteria, according to the IRS.
If you already own a car and are considering the pros and cons of refinancing a car, consider your reasons for wanting to refinance it. Are you able to get a lower rate and/or save money by refinancing?