Are you wondering if you can write off the use of your vehicle on your 2022 taxes? The answer to this question depends on how you used your vehicle during the 2022 tax year. For example, according to the IRS if you use your car only for business purposes, you may deduct its entire cost of ownership and operation (subject to certain limits). However, if you used the car for both business and personal purposes, you can only deduct the cost of its business use.
You can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method.
Standard Mileage Rate
The standard mileage rate allows you to deduct the miles you drove for business purposes. You are not, however, allowed to deduct mileage incurred during your commute to and from your place of business. For example, if you work in an office and you commute 30 miles each way, to and from work, that cannot be deducted. On the other hand, if you commute to and from work and you use your car to drive to client appointments, the mileage you incur during your workday can be deducted.
Also of note, is that in June 2022, the IRS announced that for the final 6 months of the year, the standard mileage rate for business travel will be 62.5 cents per mile, against 58.2 cents per mile for the first half of the year. The special adjustment was made due to rising gas prices.
Those interested in using the standard mileage rate must also adhere to other guidelines that have been set forth by the IRS. For more information about how these guidelines might impact you, be sure to ask your tax professional.
According to the IRS, to use the actual expense method, you must determine what it actually costs to operate the car for the portion of the overall use of the car that’s business use. This includes business expenditures for gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments). This can get a bit tricky and it’s not advised that you try to determine this figure on your own. For more information on how to calculate the actual expenses deduction, be sure to ask your tax professional.
For more information about how to accurately deduct business use of your vehicle, call our office today to get started.