Commuting in and out of Chicago can get pretty creative. Most people employ a mixture of driving, taking the train, biking, walking, or “Ubering” to get from point A to point B on a daily basis. If you do use your car for business — even just part of the time — the government may pick up some of the tab for your auto repairs during tax season. Our partner RepairPal provided a handy tax guide to help determine your eligibility.
To determine if you can write off your automotive repairs, start with a couple of questions:
What counts as a business vehicle?
If you use your own car, pickup truck or SUV to travel between two business destinations, it can be considered a business vehicle. Business destinations can be your Chicago office or other regular business location, the places where your clients are located, places where you pick up inventory, or temporary work sites. If you’re not sure if your uses qualify, check with a tax professional.
Note: commuting from your home to work does not count, nor does use of work equipment vehicles like moving trucks or dump trucks.
What repairs are deductible?
As far as the IRS is concerned, repairs keep your vehicle in safe, working condition — they don’t improve your car’s value more than it was originally, or significantly extend its life. So, while you can deduct a radiator replacement or a alternator repair, you won’t be able to deduct the installation of a backup camera or a brand new engine, for example.
Repairs are also only deductible within the year they were made. So, if you had work done in late 2016, you won’t be able to expense it for 2017 taxes.
Standard mileage rate vs. actual vehicle expenses
There are two methods taxpayers can use to deduct repairs for business vehicles: the standard mileage rate and actual vehicle expenses.
The standard mileage rate keeps things simple. If you use it, your entire deductible vehicle expense is wrapped up in one number: 53.5 cents per mile for tax year 2017. A portion of that accounts for repairs, so you won’t be able to expense them separately.
You could be better off using actual vehicle expenses if you have a lot of vehicle costs beyond wear-and-tear from mileage. The IRS has a list of these expenses; they include vehicle loan interest, rental or lease payments, gas, depreciation, garage rent, tolls and parking fees, maintenance and repairs, and more. To determine the portion of these expenses you can deduct, you’ll also need to record what percentage of time you use the car strictly for business purposes.
How to pick the right method
Generally, the lower your vehicle expenses are — meaning the costs of gas, repairs, etc. — the more likely the standard mileage rate will give you a higher deductible. Conversely, the higher your car’s operating costs, the more likely the actual vehicle expenses method is better.
Here’s one example:
Let’s say your total mileage was 14,000 miles, and 12,000 of them were business-only miles. The business use is 86%. Let’s say your gas, maintenance and repairs totaled $5,600 for the year. Let’s also say you paid $1,000 in car loan interest, and $800 for garage rent. Your total expenses are $7,400.
If you use the standard mileage rate:($0.535 x 12,000), your 2017 deduction is $6,420.
If you use the actual expenses method:(86% x $7,400), your deduction is $6,364.
It’s close, but in this case, the standard deduction has a slightly higher payoff. If you use your car even more for business, or have higher expenses, it might pay to go with the actual expenses method. Gather your records, do the math and pick the one that gives you the bigger deduction.
Keep detailed records
Did we say records? Yes, you will need documentation if you want to deduct these expenses. Using your car for business means you can write off some of your auto repairs, but a lot hinges on you recording when and how you use your vehicle within and outside of Chicago city limits.
To claim the standard mileage rate, you’ll need documentation identifying the vehicle and proving ownership, and a daily log of miles traveled for business purposes.
For actual expenses, you’ll still need a mileage log to determine your business percentage. You should also keep receipts, repair invoices and other paperwork to prove your car costs and establish your ownership. As part of anything related to taxes, documentation is the key to success!
Thanks again, Repair Pal, for this deep dive into auto repair deductions. Remember, if you if have any question related to auto repair and maintenance, Milito’s Auto Repair has you covered.
Conveniently located at 1108 W. Fullerton Ave., in the heart of Lincoln Park, our wide range of services will make your car look great on the inside and outside, help it run better, and keep you moving down the road without a single worry!