Which auto expenses are tax deductible?

Every taxpayer seeks ways to deduct his tax liability and IRS is well aware of that. Hence, to make the system more conducive for doing business, it gives deduction to businesses for incurring vehicular expenses. Let’s dive right in to make sense of what they are!

Non-deductible

First things first, not every penny that you spend on your vehicle will be provided for by the Govt. So, certain areas help you get a tax deduction: Business, Medical and Charity

In case you travel for any other reason than the above-mentioned, it’ll be categorized as a personal expense that is not deductible. The basis for deduction is the number of miles traveled.

What’s in Business?

Whenever you ride from your place of employment to any business/client meeting, it’ll be treated as a business expense. On the flip side, if you travel from office to home, it won’t be a deductible expense unless you don’t have an office in the home.

Medical care

IRS allows for tax deduction only for medical care for you and your dependents. If you drive for anything besides a medical appointment, it’ll be a non-deductible expense.

Relocating expense

Before 2018, every working American used to get a deduction for relocating but now it’s exclusively for the US military.

Charity

If you use your car for providing voluntary services to a hospital, church, or any charitable organization, it’ll be treated as a deduction.

Two ways!

There are two ways of claiming a tax deduction: Actual expenses Standard mileage rate The standard mileage rate differs depending on the reason you travel. You can calculate your $$ deduction by multiplying the number of miles traveled with the rate.

Final call Now, you have the freedom to go with either of the options. It’s prudent to go with the one that gives you more deduction.

Manvinder

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