Vehicle Expenses for Business Use

It is a misconception that you may deduct the full cost of a passenger vehicle if you use it in your business with no restrictions. Utility trucks, work vans with no passenger seats, over-the road tractors, vehicles left at your place of business, and some other types of specialty vehicles are not usually passenger vehicles, and might POSSIBLY be allowed a deduction of 100% of all expenses without logs. But this is determined by considering each vehicle and the situations surrounding the use of each vehicle. An additional note; just because you have a sign on your vehicle, advertising your business does not make your vehicle 100% business use. It does make the sign a business deduction, however.


There are two types of deductions for the business use of your passenger vehicle. But BOTH of them only allow a deduction for the business use of your passenger vehicle. You may take the standard mileage rate which varies from year to year, or you may take the actual cost of your vehicle including the cost to use and maintain it.

For the standard mileage rate, you are required to keep a mileage log of the business miles driven to multiply by the allowable rate. These logs need the beginning odometer reading on your vehicle on January 1 or the first day of use and the ending odomoeter reading on the last day of use, or December 31, which will give you the total mileage driven during the year. Then your daily logs will need four things for each business trip, no matter how short or long. 1) the date, (We suggest a pocket planner or appointment calendar and your date is already there for you.) 2) the destination (You do not necessarily need a long explanation, just a simple city or community.), 3) the business purpose (A two or three word purpose like to bid, or get supplies, or show house to ____, or whatever suits your profession, will be sufficient.), and 4) the number of miles (just the number of miles should be fine, odometer readings each day would not usually be required). The only receipts that would need to be retained for this deduction would be some maintenance records with odometer readings to prove the miles driven during the year, and some evidence that the miles driven were actually necessary and customary in your profession.

With the actual expenses, all expenses are kept for the entire year and then you will arrive at the deductible percentage of business use, using the percentage of business miles driven versus the total miles driven. The same log explained in the standard mileage deduction in the previous paragraph would also be required for this deduction. These actual expenses would include, but not be limited to, fuel, maintenance, repairs, insurance, and license tags. The cost of the vehicle would also be deducted over a period of years using IRS's depreciation rules. The allowable exception to this would be the option of using special rules to take all, or at least a large portion of the cost of the vehicle in the first year. There are other requirements that would need to be met to allow the exception that would allow this deduction.