Business Use of Personal Vehicle

One of the most popular and misunderstood business write-offs is the vehicle deduction. You can take expenses for business use of your personal vehicle if you are self-employed. There are two methods to determine the amount of the deduction you can take: the actual expense method or the mileage method. Both methods require you to track your business mileage. The mileage deduction is a per-mile deduction for every business mile you drive your vehicle. For 2020, that rate is $57.5 per mile. In the actual expense method, you track your business mileage as well as your total mileage to calculate a business percentage. Then you can deduct this percentage of all your vehicle expenses, including loan interest, gas, repairs and maintenance, insurance and depreciation. If your business use is greater than 50% in the year you purchase the vehicle, you are allowed greater depreciation deductions, but be careful because if the business use drops to less than 50% in a future year, you will have to recapture, or pay back, that depreciation. Ask your CPA if you're eligible to take the vehicle expense deduction and how much it will save you.