Car expenses can represent a substantial business deduction for family child care providers. It’s also a common subject of IRS audits.
If you are married
You can deduct expenses for your vehicle or your spouse’s vehicle, regardless of who owns it.
It only matters what is the “primary purpose” of each trip. If the primary purpose (more than half the reason for the trip) is business, then you can deduct expenses associated with the trip.
So, if your husband drives his car to the store to buy items for your business, and that’s the primary purpose of his trip, you can deduct the expenses associated with the trip. It doesn’t matter who owns his car.
If you are not married
You can only deduct car expenses associated with a car that you own.
If your friend/relative drives you to a business destination in their car, you can’t deduct car expenses associated with this trip.
However, if you pay the person who owns the car to transport you, you can deduct this payment as a business expense. (Note: the primary purpose of the trip still needs to be business.)
The owner of the car must report as income any money received by you as income.
If you don’t own a vehicle, is this a reason to marry your partner who does owns a vehicle? You decide!
Tom Copeland – www.tomcopelandblog.com
Image credit: https://www.flickr.com/photos/nrmadriversseat/
For more on car expenses, see my annual Family Child Care Tax Workbook and Organizer.