Car Expenses

• You can claim actual vehicle expenses as business expenses. Actual expenses include depreciation, gas, diesel, fuel treatments, oil, repairs, maintenance, license fees, registrations, permits, lease payments, insurance, antifreeze and tires. You can use the standard mileage rate instead of actual vehicle expenses; however, you must use this rate during the first year you place your vehicle in service. As of 2011, the standard mileage rate was 51 cents per mile for the first six months of the year and 55 1/2 cents for the second half; the rate is adjusted yearly or semiyearly for inflation. Modifications made to the vehicle to accommodate disability, comply with safety rules or for business purposes can be depreciated over five years. Modifications are separate from actual vehicle expenses. It does not matter how old the vehicle is or when it was placed in service when these modifications are made.
  
  

Tools and Supplies

• Tools and supplies that are required for your travel are tax-deductible business expenses. You must depreciate tools if they last more than one year. Supplies include vehicle and window cleaners, paper towels, rags, emergency kits, first aid kits and spare tires. Tools include air pumps, tire jacks, safety chains and electrical testers (also known as multitesters).
  
  

Travel Expenses

• If a business trip requires you to stay overnight or extends long enough to require you to rest, you can deduct lodging, meals and associated tips. Meal are subject to a 50 percent limit. If you are reimbursed by your employer for travel expenses, you may be subject to the per diem rate. You are not subject to the per diem rate if you are self-employed.
  
  

Other Expenses

• Even if you use the standard mileage rate, you can deduct business-related parking fees and tolls. If you are self-employed, you can deduct interest paid on a vehicle loan and personal property tax paid on the vehicle as a business expense on Schedule C. If you are an employee, you must itemize your deductions on Schedule A.
  
  

Considerations

• You can deduct only the business portion of your expenses Reimbursements and allowances you receive may reduce your transportation deductions. This information is not intended to replace legal tax advice.