Taxpayers who have deducted the business use of their car on past tax returns should review whether or not they can still claim this deduction. Some taxpayers can. Some cannot. Here is a breakdown of which taxpayers can claim this deduction when filing their tax returns. (Note: Even though this information is provided by the IRS, always get advice from your personal, trusted advisor as each small business situation is unique.)
For Business Owners | Individuals who own a business or are self-employed and use their vehicle for business may deduct car expenses on their tax return. If a taxpayer uses the car for both business and personal purposes, the expenses must be split. The deduction is based on the portion of mileage used for business. There are two methods for figuring car expenses:
1. Using actual expenses, including
- Lease payments
- Gas and oil
- Repairs and tune-ups
- Registration fees
2. Using the standard mileage rate
- Taxpayers who want to use the standard mileage rate for a car they own must choose to use this method in the first year the car is available for use in their business.
- Taxpayers who want to use the standard mileage rate for a car they lease must use it for the entire lease period.
The standard mileage rate for 2018 is
54.5 cents per mile. For 2019, it‘s 58 cents.
Note | There are recordkeeping requirements for both methods.
For Business Employees |Employees who use their car for work can no longer take an employee business expense deduction as part of their miscellaneous itemized deductions reported on Schedule A.
Employees can’t deduct this cost even if their employer doesn’t reimburse the employee for using their own car. This is for tax years after December 2017. The Tax Cuts and Jobs Act suspended miscellaneous itemized deductions subject to the two percent floor.
However, certain taxpayers may still deduct unreimbursed employee travel expenses, this includes Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials.
Where to Find More Information on This Topic from the IRS| Publication 535, Business Expenses