I get a lot of questions from clients regarding deducting vehicle expenses. They want to know:

1. What can I deduct?
2. How do I get this deduction?

The answer, of course, is…it depends.

1. If you’re talking about non-business purposes:
   1. Charitable miles – 14 cents per mile. As with all vehicle deductions, upon audit you would be expected to have a written record of your “charitable” miles – date, name of charity, and purpose. Also, the travel must be for the benefit of the charity, not for yourself.
   2. Medical mileage – 23 cents per mile driven for medical purposes.
   3. Moving – also 23 cents per mile – there are other restrictions regarding the move – as in, distance moved, reason for move, etc.
2. For business purposes:
   1. If you’re a “sole proprietor” – that is, self-employed – you can deduct 55.5 cents per business mile driven.
      1. Again, keep a written log of business miles.
      2. If you have an office, some place outside of your home that you go to work at, business miles do not include getting to that place of business.
      3. You may, as an alternative to just deducting 55.5 cents per mile, keep track of the actual costs of operating the vehicle and deduct the business portion of those costs.
         1. For example, depreciation of the cost of the car, the cost of gas, insurance and maintenance, interest on a car loan – all of these are actual costs. You still have to keep track of business / non-business miles, though, because you have to evidence of the business portion of those costs.
   2. If you are a shareholder of a corporation, you can:
      1. Submit an expense report to the corporation (and yes, if you are the only employee it feels like you’re giving it to yourself!) for business miles driven (date, customer or other name, miles driven) and write yourself a check for the miles at the 55.5 cents per mile rate (a rate that changes almost every year, sometime more than once per year!)
      2. Or, the corporation can own the car and deduct the costs of the car (again, depreciation, gas, insurance, maintenance, interest, etc.)
         1. However – if you have a corporation and the corporation owns the car, the driver of the car, whether it’s you or an employee, may very well have to some income included in your/their w-2 for the personal use of that car.
         2. Suppose your corporation owns the car and incurs costs of $6,000. Suppose you’re the driver and your business miles = 50% of the total miles (remember, commuting to the office does not equal a business mile). You will have to include an amount in your w-2 for the personal use of that car. Yes, the corporation can deduct those costs, but the driver, unless business use is 100%, will have to pay tax on some of the amount paid.

For 2013, the deduction per mile for charitable miles remains at 14 cents per mile; the medical deduction increases to 24 cents per mile.

The business mile rate also increases; from 55.5 cents per mile to 56.5 cents per mile.

If you have a question about your specific situation, please contact me.

jeff@vmde.com

(616) 949-9030 ext 14