What Are the IRS Rules for Deducting Mileage?


Quick Answer

The IRS allows taxpayers to deduct mileage from their income taxes if they use their cars for business. If people use current standard mileage rates for deductions, they may also include parking fees and tolls incurred for business purposes, explains the IRS.

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Full Answer

If a car is used only as part of a job or business, the entire cost of operation may be deducted, according to Topic 10 of the IRS Tax Topics. If the car is used for both personal and business purposes, only the business usage may be deducted. The IRS allows a standard mileage rate to be used when calculating deductions. However, to use the standard mileage rate, the car must be owned or leased. Furthermore only one to four cars may be used at the same time, and deductions cannot be made for fleet operations.

A claim for depreciation deduction for the car may not be used unless the claim uses straight-line depreciation, notes the IRS. A Section 179 deduction or the special depreciation allowance cannot have already been claimed. Actual expenses for a leased car after 1997 must not have been claimed, and the owner/driver of the car cannot be a rural mail carrier who received a "qualified reimbursement." Once the option for a standard mileage rate has been chosen for a leased car, the standard mileage rate must be used for the duration of the lease.

An alternate method to the standard mileage rate is the actual expense method, states the IRS. The overall costs must be determined for business use, including gas, oil, repairs and tires. Costs also include insurance, registration fees, licenses, and deprecation or lease payments. Parking fees and tolls attributed to business use are separately deductible, regardless of the calculation method used. Finally, all expenses must be substantiated by adequate records or by sufficient evidence that supports the statement of deduction.

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