Examples might be driving to
see some property you own or talking with a broker about your investments. If you have one
car that you use both for personal and business use, only deduct the portion of your car
expenses directly attributable to business use.
The Mileage Cost Basis
In allocating your car expenses between business and personal use, there are two methods
you can use. The first is the mileage cost basis. Using this method, you multiply your
business mileage by a standard mileage rate that is set each year by the Internal Revenue
Service. For 2015, that rate is 57.5 cents per mile plus parking fees, interest, taxes and
So, for example, if you drive your car 10,000 business miles over
the year, you can deduct $5,750, plus all of your business expenses for parking fees,
interest, taxes and tolls. You cannot use the mileage cost basis if you use two cars
simultaneously in the same business. It is allowable, however, if you use each car for a
The Mileage Percentage Basis
The second method is the mileage percentage basis. You divide your business-related travel
by your total mileage and take that percentage of your total expenses as a deduction. So,
for example, if you drove 20,000 total miles over the past year and 15,000 of them were
business-related, then 75 percent of your auto expenses would be deductible.
Included in such auto expenses are all of your business parking fees
and tolls, plus 75 percent of any interest, taxes, gas, oil, repairs, washing,
registration, license fees and depreciation you incurred.
There is a special tax planning strategy that you can use if you
have two cars in your family. Assume that youve been using one car exclusively for
business and the other exclusively for personal family use. You put 36,000 miles each year
on your business car and only 12,000 miles a year on your personal car. Typically, you
could only deduct the costs of using the business car.
Now suppose you switched the use of each car every six months. The
combined mileage of both cars remains 48,000 miles a year. But by rotating your cars
equally between business and family use, each car could have 75 percent of its expenses
deducted for tax purposes.
Heres how it works: Both cars are driven 24,000 miles,
but 18,000 of those miles are business-related. So instead of only deducting the costs
associated with one car, you get to deduct 75 percent of all of your expenses on both
cars. If youre like most people, that will save you several hundred dollars a year
Deduct Your "Temporary Work Location"
There is even a way to deduct some of your routine work commutes. Typically, you
cant deduct the cost of commuting to and from work. However, if you have a regular
place of business, you can deduct the daily transportation costs of traveling from your
home to a "temporary work location." A temporary work location is any locale
where you perform services on an irregular or short-term basis.
For example, daily
transportation expenses incurred by a doctor traveling between a clinic and a hospital or
between the doctors residence and a temporary work location could be deducted as
business-related. Alternatively, an executive or salesman who makes infrequent visits to
customers or clients at their offices may deduct those expenses.
If you have a home office, expenses incurred in getting from your
home office and other job sites can be deducted. Your "commute" from the bedroom
to your home office is the only portion not deductible.