May I deduct car insurance and monthly car payments if I use the standard mileage rate?

No. There are two ways to claim expenses for your vehicles. You can use the standard mileage rate or the actual expenses method.

If you use the standard mileage rate for 2016 you can deduct $.54 per business mile (the 2017 rate is $.535). In addition, you can deduct parking, ferries, tolls and the business portion of car loan interest and vehicle property tax. Some states have an annual vehicle property tax that is part of the license plate fee. That’s it.

If you use the actual expenses method you can claim the business portion of all expenses associated with the vehicle: gas, oil, repairs, car wash, parking, new tires, jumper cables, car loan interest, and so on. You can also depreciate the vehicle over five years.

The business portion of the vehicle is based on the number of business miles driven divided by the total number of miles driven. So, if you drove 2,000 business miles and 10,000 total miles, your business percent is 20%.

You can never deduct a portion of your monthly car payment. If you use the standard mileage method the cost of the car is included in the rate. If you use the actual expenses method you can claim depreciation on the vehicle.



Categories: Ask Tom, Car Expenses, Record Keeping & Taxes