Auto expense deduction

If you own or lease your car and use it for business, you have the choice of either deducting the actual operating costs, such as gas, repairs, license tags,and depreciation, or you can take the flat IRS (I-R-S) allowance. The flat IRS allowance for the 2004 tax year is 37.5 cents per mile for all business miles. If you decide to use the standard mileage rate, you won't be allowed to deduct your actual car expenses. But the rules governing this area of taxes are very complicated. For example, those who are self-employed can deduct all business expenses. But employees are subject to the so-called '2-percent floor'--the deduction doesn't start until the expenses are greater than 2 percent of the adjusted gross income. Also, if you use your car for both business and pleasure, only the percentage allocated to business can be deducted. Another deduction you can take is if you used your car for medical reasons. The standard deduction is 14 cents per mile. In all cases, record-keeping requirements are very specific. These tips are provided to give you general information about your taxes. If you have specific questions, please consult a tax advisor or call the toll-free number for Federal Tax Information and Assistance at 1-800-829-1040.