If you use your car in your job or business and you use it only for that purpose, you may deduct its entire cost of operation. However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use. You cannot deduct miles for commuting to work unless you are transporting items for your livelihood such as tools, paint, music equipment, etc.
You can generally figure the amount of your deductible car expense using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, before choosing a method, you may want to figure your deduction both ways to see which gives you a larger deduction. If you use the standard mileage rate, you can add to your deduction any parking fees and tolls incurred for business purposes. Standard miles rates for 2013 are:
- 56.5 cents per mile for business miles driven.
- 24 cents per mile driven for medical or moving purposes.
- 14 cents per mile driven in service of charitable organizations.
If you use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use the standard mileage rate or actual expenses.
If you choose to depreciate your car in the first year you cannot switch to standard milage in later years.
If you lease a car and you choose the standard mileage rate, you must use the standard mileage rate method for the entire lease period (including renewals).
To use the actual expense method, you must determine what it actually costs to operate the car for the portion of the overall use of the car that is business use. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments)