Commuting

• As a general rule, the IRS allows taxpayers to deduct expenses incurred as a result of using a vehicle for business purposes. Expenses related to commuting are the exception to this rule. If the business use of your vehicle is limited to the daily drive between your home and your office, you are not permitted to deduct gas mileage or related expenses.
  
  

Other Business Use

• Other types of business-related transportation expenses are deductible. For example, if you drive to an out-of-city office meeting, or if you travel from one office to another within your city, the mileage related to these trips is deductible. The same is true if you drive to meet with clients, regardless of their location, or if you travel from one job to another within your city -- as long as the trips occur in the course of a single workday.
  
  Expenses incurred for overnight trips are considered travel expenses rather than business-related transportation expenses and are covered by a separate set of IRS rules. (See References 2)
  
  

Calculating Deductions

• The IRS allows taxpayers to choose between the actual expenses method and the standard mileage method for calculating business-related transportation expenses. Taxpayers generally compare the figures generated by each method and choose the method that yields the largest deduction.
  
  

Actual Expenses

• Under the actual expenses method, a taxpayer records and deducts all expenses related to the operation of his vehicle, including money spent on vehicle registration, gas and oil, maintenance, repairs and parking fees, among other expenses. His deduction is equal to the total expenses related to the business use of his vehicle.
  
  

Standard Mileage

• Under the standard mileage method, a taxpayer keeps track of all business-related miles he drives during the year and applies an IRS-supplied standard mileage rate to determine the amount of his deduction. In 2011, the IRS applied a two-tiered standard mileage rate. For business transportation conducted between January 1 and June 31, the standard deduction was 51 cents per mile. For business transportation conducted between July 1 and December 31, the standard deduction was 55.5 cents per mile.
  
  Certain taxpayers, including those who have five or more business vehicles or those who operate cars for hire, are not permitted to use the standard mileage method.
  
  

Recordkeeping

• Regardless of the deduction method you choose, keep detailed records. If you opt for the actual expenses method, keep all vehicle-related receipts, including those for lease payments, gas, registration fees, parking and tolls. If you choose the standard mileage method, keep a log of the miles you travel, the purpose for your travel, and your starting point and destination.
  
  If you don’t know whether your transportation expenses are deductible, check with an accountant. He can help you avoid tax reporting errors and make the most of the deductions available to you.