How To Write Off a Car For Business
If you are looking to purchase a vehicle for your business, you might be leaving money on the table by not learning how to write off a car as a business expense.
Whether your vehicle will be used solely for business expenses or for both business and personal reasons, you are likely eligible for a tax write-off that can save you a lot of money on your tax expenses.
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.
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.
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.
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.
Automate your logbook
Mileage reimbursement in the US — rates and rules for employees, self-employed and employers in the US.
The standard mileage rate for business will be 67 cents per mile, effective Jan. 1st, 2024 - up 1.5 cents from the 2023 rate of 65.5 cents.
Find out if you fall into one of the groups of employed individuals who can claim mileage on taxes in the US in 2024.