How To Write Off a Car For Business

Writing off a car for business

When it comes to writing off a car for business owners, there are two ways to do this under IRS regulations. This is through using the standard mileage rate, which is generally the far easier option, or through the actual expenses method.

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Standard mileage rate

The standard mileage rate allows business owners to write off the expenses of their vehicle based on the number of miles they drive their vehicle for business-related purposes.

The 2024 IRS business mileage rate is 67 cents per mile.

It is crucial to actually track the business miles that you travel in order to claim the correct amount to write off and provide the IRS with proof if your business is audited. The best way to do this is with a mileage tracking application such as Driversnote that can automatically track mileage. Driversnote allows you to track your miles automatically by using a motion detector, so you won’t even have to open the app. This makes it effortless to claim an accurate deduction when you file your taxes.

The standard mileage rate is generally the easiest route to go for small business owners because it accounts for all of the expenses related to owning a vehicle, including fuel, maintenance, and depreciation. When coupled with effective mileage tracking, this produces an easy way for business owners to write off their cars.

Actual expenses

The second way to write off a car is to claim actual expenses, and this means all of the costs associated with owning and maintaining your vehicle, such as fuel, repairs, insurance, and car payments. However, before claiming all of your vehicle expenses, keep in mind that if you use your vehicle in part for personal reasons, you can only claim the percentage of expenses attributable to business use.

What this means is that you must calculate the percentage of travel attributable to business use versus personal use. This means dividing the total number of business miles by the total number of miles driven. It is important to keep an accurate record of business mileage for this as proof for the IRS.

Once you have your percentage of business use calculated, you may multiply this by your actual vehicle expenses to calculate your deduction. If, for example, you use your vehicle for 75% business use and it depreciates over five years, then you can claim 75% of the cost of the vehicle as a deduction over five years in addition to other associated expenses.

Final thoughts

Learning how to write off a car can save business owners a lot of money when it comes to acquiring a car for their business. However, as you can see, no matter how you choose to write off a car, it is crucial to track mileage accurately. Fortunately, automatic mileage tracking apps like Driversnote make it easy to record mileage and prepare tax-compliant forms for claiming your deduction.

FAQ

What does it mean to write off a car?

Writing off a car means claiming the cost of a vehicle and its operation as a deduction for tax purposes. Businesses can claim this deduction by using the standard mileage rate or actual expenses. The IRS suggests calculating the total deduction for both methods and choosing the one that offers the largest deduction.

Can you write off a used car for business?

A car must be new to you. However, you do not need to purchase a newly manufactured car. What matters is your tax basis in the vehicle which means you may still claim a deduction based on the amount for which you purchased the vehicle and your business use.