You Don’t Have to Be in Business to Deduct Vehicle Expenses

If you’re self-employed, a freelancer, or just someone who occasionally uses their vehicle for non-personal purposes, there’s good news for you—certain vehicle expenses may be deductible come tax season. And here’s the kicker—you don’t have to run a business to qualify for these deductions.

Understanding the nuances of vehicle expense deductions can save you a significant amount of money and simplify your taxes. But, as you might expect, the IRS has specific rules and requirements. Curious to know more? Stick around as we break down how the Tax Cuts and Jobs Act (TCJA) changed the game, which kinds of trips qualify for deductions, and how rates are calculated.

How the TCJA Changed Vehicle Expense Deductions

The Tax Cuts and Jobs Act (TCJA) has introduced a number of changes since its passing in 2017—and some of these directly impacted vehicle expense deductions. Before TCJA, taxpayers could deduct unreimbursed employee expenses, including vehicle costs incurred while working. Now, one of the significant changes under the TCJA is the suspension of these deductions for employees through 2025.

What does this mean? It means that unless you’re self-employed or otherwise eligible, you can no longer deduct mileage or vehicle expenses on your taxes as an employee. However, certain non-business-related uses of a personal vehicle, such as medical trips or charitable activities, are still eligible for deductions.

For freelancers, small business owners, and self-employed individuals, the rules remain more flexible. If you use your personal vehicle for tasks like meeting clients, delivering products, or driving to a temporary work site, the associated costs may still be deductible.

Medical and Moving Trips

You might be surprised to learn that even non-business-related trips can qualify for vehicle expense deductions. Two areas where this applies are medical trips and certain moving expenses.

Medical Trips

Vehicle expenses related to medical purposes can be deducted under certain conditions. This includes trips to and from medical appointments, hospitals, or pharmacies. The IRS assigns a standard mileage rate for medical-related trips, which is updated annually. Keep in mind, this deduction falls under itemized deductions, meaning you have to choose itemizing over claiming the standard deduction for it to make sense for your tax situation.

Moving Expenses

Moving for work? While most taxpayers can no longer claim deductions on moving expenses thanks to the TCJA, active-duty members of the military can still deduct moving-related vehicle expenses if the move is related to a military order. For eligible taxpayers, this includes gas and mileage costs associated with relocating to a new residence.

Charitable Activities

If you’re using your vehicle to support a charitable organization—think transporting donated goods or driving as part of a volunteer program—you can deduct these costs at a fixed charitable mileage rate. It’s the IRS’s way of encouraging community support while making your contributions count even more.

Rates Depend on the Trip

Not all miles are created equal—at least not for the IRS. Deductions for vehicle use are categorized into different types of trips, and the allowable mileage rate varies depending on the purpose. The IRS sets these standard rates annually, so it’s crucial to use the correct ones when calculating your deduction.

Here’s a snapshot of the standard mileage rates for 2023 (note that rates are subject to adjustments each year):

• Business mileage: 65.5 cents per mile
• Medical or moving purposes (for eligible individuals): 22 cents per mile
• Charitable activities: 14 cents per mile

You’ll want to keep a detailed record of the purpose of each trip, the miles driven, and the total expenses incurred. A mileage log is your best friend here—either an old-school notebook or one of the many digital mileage-tracking apps available today.

Don’t forget, if you decide not to use the standard mileage rate, you may opt for deducting your actual expenses. This could include costs like gas, maintenance, insurance, and depreciation. However, tracking actual expenses requires diligent record-keeping, and it might be worth consulting with a tax professional to decide which method will save you more.

We Can Answer Any Questions

Navigating the world of vehicle expense deductions can seem overwhelming at first, especially if tax laws and IRS guidelines aren’t your forte. That’s where we come in. At SD Mayer & Associates, we’re not just here to crunch numbers—we’re here to help you understand how to make the most of every tax benefit available to you.

Whether you’re a freelancer trying to keep things simple, a small business owner maximizing your deductions, or a self-employed professional balancing multiple vehicles for different needs, we’ve got you covered.

If you’re ready to optimize your tax savings and gain clarity about your deductions, don’t hesitate to reach out to us. Book a consultation with SD Mayer today and take the first step toward keeping more of what you earn.