If you use your car for business purposes, the IRS allows you to deduct expenses incurred, from your taxable income.
You will have to itemize your deductions, which is done on Form 2106 (Employee Business Expenses).
Self-employed taxpayers can use a Schedule C to claim expenses.
When you drive your vehicle for business expenses, you may find using the standard mileage rate, 54 cents per mile for 2016, to calculate your expenses is beneficial. You will have to keep track of your mileage driven for business, either using a smartphone or an actual paper log. Whichever way you chose to track your mileage, taking the deduction is fairly simple: you multiply the miles by the allowable rate according to the IRS.
You can also deduct the actual expenses you incur while driving your car for business. However, unless the business use of your vehicle is more than 50% of the time the vehicle is driven, usually the actual method of deduction is less beneficial.
With the standard mileage method, the amount you are able to deduct is relevant to how your vehicle was used. The IRS has set the following rates:
You are not able to deduct expenses that you incurred if you commute to work.
Additionally, if you used actual expenses in the previous year, you have to continue to use that method. You're not able to use the standard mileage rate.
If more than fifty percent of the time you drove your vehicle last year was for business purposes, you may benefit from deducting actual expenses over the standard mileage rate. You'll need to keep track of all the costs in relation to operating your vehicle.
These costs can include:
Gas and oil
Maintenance and repairs
Depreciation or lease payments