question: I own a small business and file Schedule C on my personal tax return. I use my personal vehicle for deliveries and business-related errands. Can I deduct car expenses on my tax return?
answer: Local transportation expenses are transportation expenses that are generally incurred when using a car for business purposes. However, this also includes travel by train, bus, and taxi. Businesses (including self-employed individuals and legally employed individuals) can deduct normal and necessary local transportation costs from their gross income.
Commuting costs between a taxpayer’s place of residence and a business located within the area of the taxpayer’s tax residence are generally not deductible. However, deductions are allowed for expenses incurred in excess of normal commuting costs for transporting work-related tools and materials.
Effective January 1, 2018, individuals who work in more than one different location in a day will no longer be able to deduct the costs of traveling from one location to another.
Expenses such as gas, oil, tires, repairs, insurance, depreciation, parking fees, tolls, licenses, and garage rent for vehicles used in your trade or business are deductible. Only business expenses are eligible for deduction.
Under tax law effective January 1, 2018, unreimbursed employee expenses are no longer deductible as a miscellaneous deduction subject to the 2% adjusted gross income floor. However, sole proprietorships that file a Schedule C are not affected by this change.
Taxpayers can substantiate car expenses by keeping accurate records of gas, insurance, and other expenses paid, along with detailed mileage records. A pre-printed auto expense diary, available at most business stationery stores, is a great way to track your expenses and mileage.
The standard mileage method allows you to determine your deduction amount by multiplying all business miles you drive during the year by a standard mileage rate. The standard mileage rate for 2023 was 65.5 cents per mile, but it increased to 67 cents per mile starting January 1st. In addition to the standard mileage rate, the business portion of parking and toll fees may be deducted. You may find this method easier and more cost-effective, since you only need to track and certify your business miles and not your expenses (other than parking and toll fees). not.
Barry Dolowich is a certified public accountant and owner of a full-service accounting and tax practice with offices in Monterey. They can be reached at (831) 372-7200. If you have any questions, please contact us at PO Box 710, Monterey 93942 or email bdolowich@gmail.com.