With this information, you can then either deduct an amount equal to the business miles times a standard per-mile rate of roughly $.35 or $.40 a mile (depending on the year)… or you can deduct the percentage of your vehicle expenses equal to the percentage that your business miles represent.

Note that only your business miles—and not your commuting miles or personal miles are deductible.

For example, if your business use equals 5,000 miles, personal use equals 3000, and commuting equals 2000 miles, your total miles for the year equal 10,000. Business miles as a percentage of total miles equal 50% because 5,000 divided by 10,000 equals .5 or 50%.

In this example, you could therefore deduct 50% of your fuel, 50% of your insurance, 50% of your maintenance and repairs, 50% of the car loan interest, 50% of the depreciation, and so on, as a business deduction. This means you can’t ever deduct all the costs of owning and running vehicle—only the business use of a vehicle.

If you don’t have exact records about your business use, you can sometimes use good sampling. For example, if you keep a good appointment calendar of your business activities, one popular tax reference suggests that you can look at the total business, personal and commuting miles driven during one week each month. Then, you can average this data to get good weekly estimates of your business, personal, and commuting miles. Finally, you can multiple these weekly estimates by 52 (the number of weeks in a year) to get reasonable estimates of your business, personal and commuting miles.

But before you go out and buy a new luxury auto, you need to know there’s another complication. Congress limits in most cases the amount of depreciation or lease rental that you can include in your vehicle expense calculations. The rules are a bit tricky, but essentially, for purposes of vehicle depreciation and lease payments, you only get to look at the first $17,000 (roughly) of vehicle cost. In other words, if you buy a $60,000 vehicle and your friend buys a $15,000 vehicle, you may both have the same business depreciation expense—even though your vehicle costs four times what your friend’s does.

One other related point: You may have heard about the sport utility vehicle loophole. This SUV loophole really does exist. Specially, the luxury auto limits mentioned above don’t apply to sport utility vehicles that weigh more

For example, if your business use equals 5,000 miles, personal use equals 3000, and commuting equals 2000 miles, your total miles for the year equal 10,000. Business miles as a percentage of total miles equal 50% because 5,000 divided by 10,000 equals .5 or 50%.

In this example, you could therefore deduct 50% of your fuel, 50% of your insurance, 50% of your maintenance and repairs, 50% of the car loan interest, 50% of the depreciation, and so on, as a business deduction. This means you can’t ever deduct all the costs of owning and running vehicle—only the business use of a vehicle.

If you don’t have exact records about your business use, you can sometimes use good sampling. For example, if you keep a good appointment calendar of your business activities, one popular tax reference suggests that you can look at the total business, personal and commuting miles driven during one week each month. Then, you can average this data to get good weekly estimates of your business, personal, and commuting miles. Finally, you can multiple these weekly estimates by 52 (the number of weeks in a year) to get reasonable estimates of your business, personal and commuting miles.

But before you go out and buy a new luxury auto, you need to know there’s another complication. Congress limits in most cases the amount of depreciation or lease rental that you can include in your vehicle expense calculations. The rules are a bit tricky, but essentially, for purposes of vehicle depreciation and lease payments, you only get to look at the first $17,000 (roughly) of vehicle cost. In other words, if you buy a $60,000 vehicle and your friend buys a $15,000 vehicle, you may both have the same business depreciation expense—even though your vehicle costs four times what your friend’s does.

One other related point: You may have heard about the sport utility vehicle loophole. This SUV loophole really does exist. Specially, the luxury auto limits mentioned above don’t apply to sport utility vehicles that weigh more

But before you go out and buy a new luxury auto, you need to know there’s another complication. Congress limits in most cases the amount of depreciation or lease rental that you can include in your vehicle expense calculations. The rules are a bit tricky, but essentially, for purposes of vehicle depreciation and lease payments, you only get to look at the first $17,000 (roughly) of vehicle cost. In other words, if you buy a $60,000 vehicle and your friend buys a $15,000 vehicle, you may both have the same business depreciation expense—even though your vehicle costs four times what your friend’s does.

One other related point: You may have heard about the sport utility vehicle loophole. This SUV loophole really does exist. Specially, the luxury auto limits mentioned above don’t apply to sport utility vehicles that weigh more

One other related point: You may have heard about the sport utility vehicle loophole. This SUV loophole really does exist. Specially, the luxury auto limits mentioned above don’t apply to sport utility vehicles that weigh more than 6,000 lbs. Note that Congress partially closed that loophole in 2004, however, by saying that a special, super-accelerated form of depreciation called Sec. 179 depreciation couldn’t be used to write off all of the cost of an expensive SUV in the year the vehicle is purchased.