Do You Use Your Car for Work?

Do You Use Your Car for Work?

Do You Use Your Car for Work?

If you are using your personal vehicle for company business, you may have a tax deduction. Examples of business use include: driving between multiple business locations on the same day, driving from the office to the bank or post office, driving from the office to meet customers or business associates, driving from the office to pick up or deliver supplies or products, etc. Note that commuting (driving between home and a business location) is not on this list!
 
Keep track of the number of miles you drive for business. The easiest tracking methods are an app on your phone or your car’s built-in mileage tracking functionality. You may also keep track by recording odometer readings on a spreadsheet. Whatever method you choose, be consistent. If you did not keep track of your business miles for the first part of the year, you can reconstruct the numbers by looking at your calendar and other records. The IRS standard is contemporaneous records, meaning that you should track the miles as they happen rather than relying solely on after-the-fact reconstruction.
 
Most small business owners receive reimbursement for business use of a personal vehicle using the standard mileage rate. For 2020, the rate is $.575 per mile, which takes into account the costs of gas, maintenance, and other aspects of vehicle ownership. Record the reimbursements as “Automobile (or Mileage) & Transit” expense on your P&L.
 

Tip: If you have a qualifying home office – an area in your home that is used regularly and exclusively as your principal place of business – then you are already at a business location when you begin your day. Thus, driving between home and a business location qualifies as business use and is not considered a commute.


Sunrise and Lendio do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal, or accounting advice. You should consult a tax, legal, and accounting advisers before engaging in any transaction.




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