What Tax Deductions Can I Take For Using My Car?

As the tax year ends and you scramble to pull together your year end tax deductions, people often ask us whether they can get  a deduction for using their automobile.  It’s important to understand these rules for both employees and business owners alike as this could mean big bucks in your pocket come tax time.

According to the IRS Topic 510 business use of a car (http://www.irs.gov/taxtopics/tc510.html), you can generally figure the amount of your deductible car expense using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, before choosing a method, you may want to figure your deduction both ways to see which gives you a larger deduction. Please refer to Publication 463, Travel, Entertainment, Gift and Car Expenses, for the current standard mileage rate. If you use the standard mileage rate, you can add to your deduction any parking fees and tolls incurred for business purposes.

If you use the standard mileage rate, make sure to keep excellent documentation.   You cannot deduct mileage for your normal commute to and from work every day unless you have a home office.  For 2011, all business miles you incurred during the year will be calculated at a rate of .51 cents per mile for the 1st half of 2011 and .55 ½ cents for the second half of 2011.   For some of you, this can mean thousands of dollars per year if you use your car for business purposes.  If your employer reimburses for normal mileage/auto reimbursement, you cannot double dip with the deduction.

Purpose

Rates 1/1 through 6/30/11

Rates 7/1 through 12/31/11

Business

51

55.5

Medical/Moving

19

23.5

Charitable

14

14

If you qualify to compare the standard mileage and actual use method, make sure you get all of your receipts together so you can calculate a fair comparison.  Actual car expense can potentially include all of the following items.   Since gas has been at a fairly high cost during the course of the year, you should really sit down year end to take a look at what method is best for you.

Actual car expenses include:

Depreciation Licenses Lease payments Registration fees
Gas Insurance Repairs
Oil Garage rent Tires
Tolls Parking fees

If you work for yourself, car expenses can be one of the larger deductions come filing time.   Don’t make a mistake and turn the engine light off.  Do your homework and figure out which method drives you to a bigger refund in 2011.

Visit to www.oxygenfinancial.net to request a free consultation with the leading financial experts for people in their 20’s, 30’s, and 40’s in the country.

Written by:

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

Co-CEO and Founder of oXYGen Financial, Inc

Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice and Smart Money Moves to the X and Y Generation.

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About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

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