Tax Tips: Claiming automobile expenses
After you have added up your mileage for the year, you have two choices. You can multiply those miles by the standard rate of 48.5 cents per mile (for 2007) and deduct that total. Your other option is to keep track of fuel, repairs, oil changes, depreciation and other costs to operate your car. You can then allocate those costs between your personal miles and the total business miles you calculated, and deduct the portion related to the business miles.
Most taxpayers use the standard mileage rate because it's easier. A word of warning, however: many taxpayers do not keep track of their actual mileage, as required by the IRS. This is like playing with fire if you ever get audited. The IRS will likely disallow that deduction if you can't provide proof of actual business miles driven. One other thing to note: Your commute is almost never deductible. About the only exception to this is when you're driving to a temporary work site.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.