Writing off business expenses is an important and often relieving part of tax season, especially if you spent a lot for work purposes in the past year. One expense you might not have considered tax-deductible is repairing your vehicle. However, if you use your car for business even part of the time, the government could pay for some of those repairs.
There are a number of factors when it comes to your vehicle and repairs being deemed tax-deductible, but it really boils down to three key factors. Your car must be a business vehicle, your repair must be deductible (we’ll discuss this), and the method of deduction. Below, we’ll discuss each.
What Counts as a Business Vehicle
The determination of your vehicle as a business vehicle is the first step to its repairs becoming tax-deductible. What does it mean to be a business vehicle? Well, if you use your own car, truck, or SUV to travel between business locations, it can be considered a business vehicle. Business destination(s) can also be defined not just as offices, but anywhere you regularly travel for business, such as job sites, inventory pickup spots, and client locations.
Commuting between home and work does not count, nor do company vehicles, of course. These are not qualified as work uses for your vehicle.
Only certain repairs are actually deductible. The IRS regards repairs that keep your vehicle in safe, working condition as deductible. This means that any repairs or additions that increase your car’s value or add features are often not included, such as backup cameras or an entirely new engine.
What it does often include are things like radiator replacement or a fixed headlight, as these things are necessary for you to use your vehicle for the above work purposes.
Mileage Rate and Vehicle Expenses
There are two methods taxpayers can use when deducting repairs for business vehicles: standard mileage rate and actual vehicle expenses. The standard mileage rate is simple; your entire deductible will be wrapped up into 54.5 cents per mile for the entire tax year. Some of that accounts for repairs.
If you have repairs done beyond basic wear-and-tear damage, you might be better off using actual vehicle expenses instead of mileage. You can view the IRS’s list of these expenses. You’ll need to calculate what percentage of time to use the vehicle for strictly business.
Choosing the Right Method
Generally, the lower your vehicle expenses are, the more likely the standard mileage rate will give you a better deductible. Conversely, the higher the costs, the more likely the actual vehicle method is better for you.
It can often be close, but if you use your vehicle more often for business expenses, or you have higher expenses, it can be best to use those actual expenses as deductibles. Gather your records, do the math, and pick the one that gives you a better deduction.
We hope this information proves valuable as you begin your tax season. For an auto partner you can trust, give us a call today!