You can claim vehicle operating tax that relates to the business use of the vehicle. If you rent a vehicle for use in your business, you could deduct the rental expenses and operating expenses from your business use percentage. If you use the rented vehicle only for business purposes, you could deduct 100% of the expenses.
Whether you own or rent a vehicle, you need to use keep receipts. You can generally do this by keeping track of the mileage you drive for business purposes.
When you use hired transportation for business purposes, you can deduct your expenses by using either a passive measure or an expense item. But if you choose to use the transportation measure when renting a vehicle, you must use the passive measure for the entire rental period. You cannot change the number of miles in the following year at the same price.
There are also some restrictions on using the mileage measure. You may not use the standard mileage if you are using the vehicle to transport persons or property for reimbursement or payment. And if you operate five or more vehicles at the same time, you can’t use the mileage sign.
The flag is changed every few years or sometimes in a year. You can find standard mileage on the IRS website.
When you use the actual expense account, you can deduct the cost of gas, oil, repairs, tires, insurance, registration and licenses. When you own a vehicle, you can deduct the depreciation, and you can deduct the cost of leasing the vehicle with an insurance company. All of these items would be free of charge, depending on the business use of the vehicle. If you make any advance payments on the lease, you must extend them over the entire term of the lease.
When you lease a vehicle, you must reduce your deduction for lease payments by what the IRS refers to as a total inclusion. This is intended to limit tax deductions for vehicles with better quality.
There are tables for the amount of inclusion in IRS Publication 463, Travel, Entertainment, Gifts, and Car Expenses. To figure out the inclusion amount that applies, you must first determine the the fair market value of the vehicle on the first day of the lease term. Then, using the attached table, find the inclusion amount that corresponds to the market value of the tax year in which you use the vehicle. The inclusion amount is extended by the number of days the lease term is included in the year and is multiplied by the percentage of business use of the vehicle.
You can deduct the cost of fees and taxes for business use either as a passive measure or as a purchased measure.
You must keep receipts and documentation of all your actual expenses if you use the actual expense method.
Sources:
Publication 463, Travel, Entertainment, Gift, and Car Expense, IRS
Topic 510 – Business Use Car, IRS
Report:
- 5 Myths About Car Rentals: kiplinger.com/columns / car/archive/2008/car0107.html
- Lease or Buy a Car? – Calculated: www.smartmoney.com /calculator/autos /buy-or-lease-a-car-1302833645461/
- New Wheels: Rent or Buy? finance.yahoo.com/news/wheels-lease-buy -220522677.html
