Car Expenses: If you use your car for business, you may write off various expenses as tax deductible.
There are two methods for deduction in car expenses: the actual expense method and the standard mileage allowance.
The actual expense method allows you to deduct all of your out-of-pocket costs for operating your car for business.
Instead of keeping a record of all your car expenses and having to calculate car depreciation, you can use a standard mileage allowance to determine your deductions for business use of your car.
In 1999, the standard mileage allowance for business use of a car in the US was 32.5 cents per mile for traveling from January through March and 31 cents per mile for traveling from April through December. This rate is adjusted annually for inflation.
You are free to choose the method of car expense deduction that is the most appropriate for your need. In some case, however, you may not be able to use the standard mileage rate. Remember that if you use the actual expense method for the first year, you will not be able to claim standard mileage rate in later years. The same is not true if you start by using standard mileage rate. If you use the standard mileage rate, you can still use the actual expense method in later years.
Additionally, if you bought an electric car and used it for business, you may be entitled to a tax credit. This credit reduces your taxes dollar-for-dollar and generally is worth more to you than deductions.
