How can I deduct use of my vehicle for business? - Accounting ...

A taxpayer may deduct the use of personal vehicles for business using one of two methods: the ?standard mileage rate? method or the ?actual expense? method.?

The standard mileage rate method: The IRS issues a per-mile rate that can be used to create a deduction based on miles driven for business. In 2012 the rate is 55.5 cents per mile. The deduction is created by multiplying the rate by the amount of business miles.? If you are a Schedule C business owner you can take this deduction on your Schedule C. If you incur the expense as an employee you can claim a deduction by filing form 2106, Employee Business Expenses. The amount reported gets reduced by any reimbursements received from your employer and ends up as a miscellaneous itemized deduction on? Schedule A of your 1040 & these types of deductions are limited to 2% of your adjusted gross income. NOTE: if you would like to use this method, you must make sure to do so in the first year that your vehicle is used for business purposes, and then in the subsequent years you may choose whichever method gives you the better deduction.

The actual expense method: If you use the actual expense method you must determine what it costs to operate your vehicle including gas, oil, repairs, insurance, registration, etc. You will multiply the actual cost by a percentage representing business miles divided by total miles.

Both methods require the taxpayer to keep good records of business mileage.? Make sure to note your mileage on your odometer at the beginning and the end of the year, and keep a log of every business trip with the date, total miles traveled and a description of the business activity.

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