Can I Deduct Car Expenses for Business Travel To and From a Home Business?

Question: Can I Deduct Car Expenses for Business Travel To and From a Home Business?

Answer:

You can deduct business-related car expenses for travel back and forth under these circumstances:

• You work at home in your home based business
  
• Your home is your principal place of business (the place where you earn most of your income or where you do your administrative or management tasks)
  
• You don't commute back and forth from your home to an office, and
  
• You can prove that the car expenses were business related, not personal.

How Do I Prove Car Expenses are Business Related?
The IRS looks very carefully at car expenses for small businesses. They want to see detailed records that were:

• Noted at the time of the expense (not weeks later) and
  
• Detail the date, reason for the trip, and other information to show that the car travel was business related.

What Car Expenses Can I Deduct?
You can deduct all ordinary and necessary expenses related to business travel, but no personal travel. You can deduct these expenses for car travel to and from business locations. For example:

• the home of a client
  
• the office store where you buy office supplies
  
• temporary job sites where you work for clients
  
• places where you meet with clients, customers, or business advisers
  
• your warehouse or the place where you keep your business inventory
  
• a convention center where you participated in a business seminar.

How do I determine these car expenses?

• You can use the standard mileage deduction rate set by the IRS (55 cents a mile for 2009), or
  
• You can keep track of actual costs for all car-related expenses.

Both the standard mileage and actual costs methods have advantages and drawbacks. Using the standard mileage rate is less trouble, because all you have to do is set out the miles traveled for business purposes, but the actual cost method sometimes results in higher deduction amounts.

Remember, although business travel to and from your home based business is deductible, it must be documented and recorded at the time of the trip. Don't get caught shorthanded without these documents in the event of an IRS audit of your business.

Disclaimer This article, and the information on this GuideSite, are intended for general information only. I am not a CPA, tax attorney or Enrolled Agent. Consult with your tax professional for information relating to your specific situation.