Car Expenses
To take a business deduction for the use of your car, you must determine whether the use was
business or personal.
If the answer is personal, no deduction is allowed. Personal use includes commuting - driving from your home to your regular place of work.
A deduction may be allowed if you have multiple jobs or businesses. Driving from your home to "business one" is commuting, but driving from "business one" directly to "business two" is deductible. Also, you are usually allowed to deduct transportation costs for going from your home to a temporary workplace regardless of the distance.
Deductible car expenses can include the cost of 1) traveling from one workplace to another, 2) making business trips to visit customers or attending business meetings away from your regular workplace, 3) going to temporary workplaces.
To claim the deduction, keep adequate records, such as a written travel log with complete and accurate mileage records for each business use of your car. If you are unable to produce a clear and accurate business mileage record, the IRS may disallow the deduction.
There are two methods for claiming business car expenses: actual expenses or the standard mileage rate.
Actual Expenses: You can total all of your car operating expenses for the year, including gas, oil, tires, repairs, license fees, lease payments, registration fees, garage rental, insurance and depreciation. Deduct the percentage of the total that was for business, based on your mileage records of business and personal travel. Deductions for business parking and tolls do not have to be divided.
Standard Mileage Rate: Instead of tracking car costs, you can use the standard mileage rate. In 2003, the business mileage by rate was 36 cents per mile for all business miles (this rate may change each year). If you use the standard mileage rate, you cannot also claim your actual operating expenses, but you can claim your business parking and tolls.
Travel Expenses
Travel expenses are your "ordinary and necessary" expenses while you are traveling away
from home on business. You are required to show that your trip away from home was primarily
for business.
Keep all receipts and whatever other documents you can gather at the time of the trip to prove where you went, why you went there, how long you stayed and how much you spent. If your travel includes some business and some personal aspects, be sure to keep clear records showing exactly how much is related to business. Keep the following:
Lodging receipts: These should show where you were, how long you were there, and charges. Also keep records for cleaning and laundry, telephone charges, tips, and other charges not shown separately.
Transportation receipts: These include airplane, train or bus ticket stubs, travel agency receipts, rental car or taxi receipts, etc., all showing the amounts, dates and destinations involved.
Meal receipts: Generally, you must keep a log of your meal expenses and save receipts for amounts of $75 or more. If you do not want to keep track of the actual costs of your meals, you may qualify to use the standard meal allowance. In 2003, the rates were $30, $34, $38, $42, or $46 a day, depending on where and when you were traveling in the United States.
Whether you use the standard meal allowance or actual expenses, you generally can only claim a deduction for 50 percent of the unreimbursed cost of your meals while you are traveling.
See IRS Publication 463, "Travel, Entertainment, Gift, and Car Expenses," and Publication 535, "Business Expenses."
Information courtesy of the Internal Revenue Service.
