J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Deducting Car Expenses in General

The discussion in this chapter applies to cars used partly or entirely for business.

Car

Any 4-wheel vehicle made primarily for use on public streets, roads, and highways that has an unloaded gross vehicle weight of 6,000 pounds or less (the manufacturer can provide this information). A truck or van is a “light” truck or van if its unloaded gross weight is 6,000 pounds or less and is subject to rules similar to those for passenger cars. Excluded from the definition is an ambulance, hearse, or combination thereof used in business and any vehicle used in business for transporting people or for compensation or hire.

The law allows you to choose between 2 methods for deducting business-related expenses of a car: the actual expense method or the standard mileage allowance fixed by the IRS, both of which are detailed in this chapter.

Choosing Between the Actual Expense Method and the Standard Mileage Allowance

Read over the rules on the actual expense method and the standard mileage allowance. For the most part, the choice of method is yours. The choice applies whether you own or lease the car. In some cases, however, you may not be able to use the standard mileage rate. Where you are not barred from using the standard mileage rate and can choose between the methods, which is better? Obviously, it is the one that produces the greater deduction. However, there is no easy way to determine which method will produce the greater deduction. Many factors ...