Tracking actual car and truck expense tax deductions is a more complicated method than using standard mileage. However, it may be beneficial to you at tax time if it lowers your taxes. In addition to tracking your business and personal mileage, you’ll need to track all your car expenses, such as gas, repairs/maintenance, insurance, license fees, parking fees for business, tires, car washing, lease payments, towing charges, and auto club dues. In addition, you can deduct a portion of your car as “business use” and deduct the depreciation of your car’s value.
You’ll need to keep receipts and track each of these expenses as well as business and commuting miles. At tax time, you’ll use your business versus personal miles to figure out what portion of your car expenses went to your driving job. Once you have that percentage, multiply that number by your expenses—that will be the amount you can deduct on your taxes.
For example, imagine that a quarter (25 percent) of the miles you drove were for Uber or Lyft, and three quarters (75 percent) of your miles were personal. If you spent a total of $9,000 on car expenses, you would multiply $9,000 by .25, giving you a $2,250 tax deduction for your actual expenses.
Figuring out vehicle depreciation. Vehicle depreciation is the decline in value of your car after a year due to regular use. You can use this number as a business expense if you use the actual car expenses method. Of the many figures you’ll be tracking, vehicle depreciation can be the most complicated number you’ll need to calculate.
If you choose to use actual car and truck expenses, seek assistance with vehicle depreciation. This tracking method is out of scope for free tax filing sites.
Remember, all drivers need to track business mileage, whichever expense method is used.
All information on this site is provided for educational purposes only and does not constitute legal or tax advice. The Center on Budget & Policy Priorities and the CASH Campaign of Maryland are not liable for how you use this information. Please seek a tax professional for personal tax advice.