It’s possible to get a tax deduction for car mileage if the vehicle is used for business purposes, charitable services, medical purposes and moving or relocating. If the vehicle is only used for business purposes, the complete cost of operating the vehicle can be deducted but if the vehicle is used for both personal and business purposes, only costs incurred for business use of the vehicle may be deducted.
- It’s essential that you maintain records of car mileage and the expenses incurred in order to get the tax deduction.
- Start noting the odometer reading from the date you start using your car for business purposes. Note the date, number of miles driven and the purpose for which the car was driven.
- Also note the expenses incurred for each trip, be it expenses for driving the car or maintaining it. Note the date, the amount and the type of expense incurred. Also keep the receipts of all such expenses filed properly.
- The expenses can include gasoline, oil change, parking fees, repairs, car insurance, toll fees and car registration fees.
- You have to maintain records of any reimbursements related to car expenses you receive from your employer.
- At the end of the year, calculate the business miles travelled in the year and the expenses incurred for business related purposes for the same duration. Also calculate your reimbursements received.
- Use this information when you prepare your income tax returns and be careful to keep your records for at least three years before discarding them.
- The IRS also allows small engine tax credit and this can be used to your advantage if you have a hybrid car, electric car or any other vehicle with a small engine.
We hope you’ve found this helpful. We want to see you get the most for your tax refund, so stop by Texas Auto to browse our used cars this tax season.