If you are not reimbursed by your employer for your costs of required business travel in your car, you can generally deduct those costs on your individual income tax return by either deducting your actual costs or by computing a deduction using the IRS optional standard mileage rate for business travel (34½ ¢ in 2001; 32½ ¢ in2000). . However, if you could have been reimbursed by your employer but didn't seek reimbursement, the IRS won't allow your deduction. Also, these costs are deductible by an employee only as a miscellaneous itemized deduction subject to a 2% of adjusted gross income floor.
To avoid any uncertainty as to whether you could have been reimbursed, the employer should indicate to you in writing or in some clear policy declaration that you are required to provide your own automobile and pay for its operation and maintenance in performing your services for the employer.
The IRS requires you to keep certain specific information to back up a deduction for the business use of your personal automobile. These items of information include the total mileage driven, the business mileage driven, percentage of business use, etc.
If you own (rather than lease) your automobile, you can compute your business travel deduction under the IRS optional standard mileage rate instead of adding up all of your actual expenses to arrive at the deduction. This can substantially reduce the amount of records, receipts, etc. that you otherwise have to collect and retain. Under the optional standard mileage rate method, you must keep track of the actual miles you drive for business purposes. It is not necessary for you to keep records for depreciation, cost of maintenance, repairs, tires, gasoline, oil, insurance, registration fees, etc. However, in many situations, actual expenses will generally provide a larger deduction.
This could occur, for example, where there is low mileage but a large business use percentage.. While computing your actual automobile expenses may result in a larger deduction than multiplying your miles of business travel by the IRS optional standard mileage rate, the difference may be more than offset by the savings in time and energy, stemming from the reduced record keeping described above.
Even when the optional standard mileage rate is used to compute the deduction, certain automobile travel expenses, such as parking fees and tolls, may be deducted separately. These additional items should be supported by adequate records and receipts.
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