If you use your car in your job or business and=
you
use it only for that purpose, you may deduct its entire cost of operation
(subject to limits discussed later). However, if you use the car for both
business and personal purposes, you may deduct only the cost of its business
use.
You can generally figure the amount of your
deductible car expense using one of two methods: the standard mileage rate
method or the actual expense method. If you qualify to use both methods, be=
fore
choosing a method, you may want to figure your deduction both ways to see w=
hich
gives you a larger deduction. For 2006, the standard mileage rate is 44.5 c=
ents
a mile for all business miles driven. If you use the standard mileage rate,=
you
can add to your deduction any parking fees and tolls incurred for business
purposes.
To use the standard mileage rate, you must own =
or
lease the car; the car must not be used for hire, for example as a taxi; you
must not operate five or more cars at the same time, as in a fleet operatio=
n;
you must not have claimed a depreciation deduction using the Modified
Accelerated Cost Recovery System (MACRS) on the car in an earlier year or a=
ny
method other than straight-line for its estimated useful life; you must not
have claimed a Section 179 deduction on the car, the special depreciation
allowance; and you must not have claimed actual expenses after 1997 for a c=
ar
you leased. You cannot use the standard mileage rate if you are a rural mail
carrier who received a "qualified reimbursement".
Further, to use the standard mileage rate for a=
car
you own, you must choose to use it in the first year the car is available f=
or
use in your business. Then, in later years, you can choose to use the stand=
ard
mileage rate or actual expenses.
However, for a car you lease, you must use the
standard mileage rate method for the entire lease period. For leases that b=
egan
on or before December 31, 1997, the standard mileage rate must be used for =
the
entire portion of the lease period (including renewals) that are
after 1997.
To use the actual expense method, you must
determine what it actually cost to operate the car for business purposes.
Include gas, oil, repairs, tires, insurance, registration fees, licenses, a=
nd
depreciation (or lease payments) attributable to business miles driven.
Other car expenses for parking fees,
and tolls attributable to business use are separately deductible, whether y=
ou
use the standard mileage rate or actual expenses.