The IRS allows taxpayers to reduce their taxes by deducting car expenses for business, charitable, medical and relocation purposes, notes the agency. As of August 2015, taxpayers can claim 57.5 cents per mile for business purposes, 14 cents per mile for charitable reasons, and 23 cents per mile for medical or moving expenses. The IRS publishes updated rates each year on IRS.gov.Continue Reading
Rather than use the IRS's standard rates, taxpayers also have the option of deducting their actual vehicle costs, notes Small Business Trends. However, a majority of individuals opt to deduct the standard rates as they are otherwise required to maintain detailed documentation and evidence. Moreover, taxpayers who lease their vehicles may not alternate between the two methods in each year, cautions the IRS. In order to use the standard rates, taxpayers must not operate more than four cars and must also not claim depreciation expenses based on any method other than straight-line amortization.
Taxpayers are entitled to deduct significantly more for business expenses since the business rates take into account operating costs, explains Forbes. The IRS restricts other mileage-based deductions to fuel costs. When taxpayers claim actual business expenses, they can deduct costs for tires, registration fees, licenses and lease payments as well as gas, oil and insurance.Learn more about Taxes