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Here’s the 411 on who can deduct car expenses on their tax returns

8/2/2019

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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’s a breakdown of which taxpayers can claim this deduction when they file their tax returns.
​

Business owners and self-employed individuals
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
  • These include:
    • Depreciation
    • Lease payments
    • Gas and oil
    • Tires
    • Repairs and tune-ups
    • Insurance
    • 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.

There are recordkeeping requirements for both methods. 

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 2% 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.

More information:
Publication 535, Business Expenses

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

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Phone: (630) 320-3720

Monarch Accounting Group Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527-7836
Email: Info@MonarchAccountingGroup.com


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  • Home
  • Solutions
    • CFO Services
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