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Tax Deduction for Business Use of Your Personal Vehicle 
 
by kmhagen July 26, 2005

If you use your own vehicle for business purposes, you may be able to take a tax deduction. If you are an employee, you can deduct the expenses as an itemized deduction. If you are self-employed, your expenses can be deducted as a business expense.

If you use your own vehicle for transportation related to your work as an employee, you can deduct your expenses for business use of your vehicle, subject to the rules on deductible transportation expenses. You would need to file Form 2106, Employee Business Expenses, and take the deduction as a job-related itemized deduction on Schedule A. If you are self-employed and use your vehicle in your business, your expenses are business expenses, and would generally be reported on Schedule C, C-EZ, or F.

If you qualify, you can deduct your actual expenses or use the standard mileage rate. If you use actual expenses, you will need to divide your expenses between deductible transportation expenses and personal expenses. These can be allocated on the basis of mileage for each purpose. And if you use the standard mileage rate, you will need to keep track of your mileage for work or business use of your vehicle.

Interest on a Car Loan and Property Taxes

Interest on a loan you take out to purchase a vehicle and property taxes on your vehicle are generally considered separately. These are not included in the standard mileage rate.

Interest

Interest you pay on a car loan is personal interest and is generally not deductible. But if you take out a home equity loan, that qualifies in order to deduct mortgage interest, you may be able to take an itemized deduction for the interest on Schedule A.

If you are self-employed and use the vehicle in your business you can deduct a percentage of your interest, based on the business use of the vehicle, as a business expense, on Schedule C, C-EZ, or F, for example.

Property Taxes

Personal property taxes that are based on the value of your vehicle can be taken as an itemized deduction, even if you did not use the vehicle for business. If you are self-employed, you can take the business percentage of personal property taxes as a business expense, and the balance as an itemized deduction.

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