Declaring Business Use of a Personal Vehicle

When your job status is as an employee, only a few deductible expenses apply to you. One of these is using your own car for business purposes. If you qualify, you can claim a portion of your car operating expenses, such as fuel and oil, as well as insurance and other costs. If you drive frequently for work reasons, this can add up. However, there are a number of conditions you must meet before you can start expecting refunds.

Qualifying Use

The Internal Revenue Service permits deductions in one of two ways: standard mileage rate and actual expenses.

To use the standard mileage rate, there are a number of disqualifiers for the IRS, which include:

  • your car is part of a fleet of five or more vehicles
  • you claim depreciation in some form other than straight-line depreciation, or you claim the special depreciation allowance
  • you claim a deduction under Section 179
  • you’ve used the actual expenses method after 1997 for a vehicle you’ve leased
  • you’re a rural mail carrier receiving a qualified reimbursement

To use the standard mileage rate for a car you own, you must use the standard rate in the first year of company use. After that you can choose between standard or actual expenses methods. For leased vehicles, however, you must use the standard rate for the entire term of the lease, if you choose it over actual expenses.

Other Expenses

No matter which method you choose, some other car-related expenses are deductible separately, including things such as parking fees, road or bridge tolls.


If you’re reimbursed your vehicle costs by your employer, then you may not be eligible to claim use-of-car expenses. The dividing line usually comes down to accountability. If you provide your boss with a a log of miles driven, or a summary of expenses you’ve paid out of pocket — an accountable plan —  and you’re reimbursed based on the business use portion of those costs, your employer should not include reimbursements on your W-2, and you’re not eligible to claim expenses.

If, however, you don’t report mileage or expenses to your employer — a nonaccountable plan — but you are reimbursed for some or all of these costs, the reimbursements are part of your pay, and you can deduct business use auto expenses from your income.

For current information, see IRS publication 463, Travel, Entertainment, Gift, and Car Expenses.



About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.

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