Some car repairs and maintenance may be tax deductible under the right circumstances. The first question to be answered is whether the car was used for business purposes. Driving to work and back is not business related but if you use your car to travel between two business locations or to deliver goods or services, it may qualify. It is important to note that my comments are not tax advice, I am not a tax professional. However, I hope to give some insight as to how your car repairs and other expenses might be tax deductible and spur you to ask your tax preparer the right questions.
The type of repairs have some limitations but routine things like an air conditioning compressor replacement, brake repairs, cooling system repairs, etc. may be deductible. Adding accessories such as GPS, cameras, sound systems, etc. would not be deductible. Also, things that extend the life of the vehicle are not deductible such as an engine replacement.
There are two different types of deductions. One is the “standard deduction” which is mileage reimbursement determined at a particular rate per business mile. The IRS sets those rates each year. The second deduction type is the “actual expenses” deduction. In the “actual expenses” case, the mileage used for business is divided by the total miles driven giving a percentage rate for reimbursement of actual expenses. An example is as follows. The car was driven 14,000 total miles for the year and the miles driven solely for business related travel was 9,000 miles. 9,000 divided by 14,000 equals 64.3% of the total miles driven were business related. You would then total all of your fuel, maintenance, and repairs then multiply that total by .643 to get the amount that would be deductible. You can run the calculations and then use the deduction type that gives you the highest deduction.
Of course, the most important thing to remember is to keep immaculate records. Keep all fuel receipts, use a mileage tracking app or record business mileage by hand in a record book and be sure to file all maintenance and repair receipts. That may sound tedious but if you use your car for a substantial amount of business use, it can pay great dividends on your tax returns. As always, consult your professional tax preparer for allowable deductions.
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