Claiming Auto Use

The Internal Revenue Service gives drivers two ways to calculate auto expenses. The key to both is good recordkeeping.

One option is to keep track of actual expenses, such as gas, oil, insurance, vehicle depreciation and mileage. Add all these up and that's what it costs you to use your car to do business.

Using a car for business can be a tax-saver. It also can be confusing. Here are some of the more common things the Internal Revenue Service says you can -- and can't – deduct:

• Actual auto expenses include vehicle depreciation, licenses, gas, oil, lease payments, insurance, registration fees, repairs, tires, garage rent, parking fees and tolls.
• Even if you use the standard rate, you still can deduct the cost of business-related parking fees and tolls. The IRS makes this exception since these rates tend to vary regionally.
• If you're an employee, interest on a personal auto loan is not a deductible expense, even if you use the car only for business purposes.
• However, if you're self-employed, you can deduct the part of the interest that represents business use of your vehicle.
• Commuting is not business travel. But in some instances, travel to a temporary work location is deductible. Check out IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses, for details.
• Traffic fines for parking or moving violations are never deductible expenses.

Or, if you're not into the details of business travel, you can use the IRS' standard rate. In this case, Uncle Sam decides annually how much each mile you drive is worth and you simply multiply how far you travel by this rate. You still have to track your mileage, but don't have to worry about that extraneous auto issues. (Media Relations Office Washington, D.C. Tel. 202.622.4000)

IRS Announces 2003 Standard Mileage Rates

WASHINGTON –The Internal Revenue Service today announced the optional standard mileage rates to use for 2003 in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes.

The amounts for the various deductible costs for use of a car will be effective January 1, 2003, and are as follows:

• The standard mileage rate for the use of a car for business purposes is 36 cents a mile for all business miles driven, down from 36.5 cents a mile in 2002.
• The standard mileage rate for the use of a car when giving services to a charitable organization remains at 14 cents a mile.
• The standard mileage rate for the use of a car for medical reasons is 12 cents a mile, down from 13 cents a mile in 2002.
• The standard mileage rate to use when computing deductible moving expenses is 12 cents a mile, down from 13 cents a mile in 2002.

The IRS requires taxpayers to keep records of business travel. But it doesn't have to be complicated, just complete. Many tax professionals suggest drivers simply note the following information in their pocket calendars or day books: date, start from, go to, business purpose, total miles, gas, parking fees, tolls.