Getting your car expenses past the IRS auditor

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Entrepreneurs get around a lot, often in their cars. It's only fair that they get to deduct their business car expenses. Inconveniently, the tax law makes it your responsibility to document how much your auto use is business-related. What do you have to do to get your car deductions past an auditor?

Actual expense or standard mileage rate?

Taxpayers generally can choose between deducting their actual documented business expenses or their expenses using the IRS standard mileage rate. If you deduct actual expenses, you have to depreciate your car and save receipts for your gas, repairs, tires and so on; if you use the car for business and personal purposes, you have to document how many of your miles are business miles.

If you use the standard mileage rate, you only have to document the mileage.

How to document the miles?

The only sure way to get through an IRS audit unscathed is to maintain a current daily record of your business use. While specialized mileage logs exist, it's also acceptable to track your miles in your ordinary business calendar. It's very important to not your car's odometer reading at the beginning and end of the year, and preferably each month. In a pinch, you can go back to your appointment calendar to reconstruct your mileage, but this is a hassle, and your IRS agent may not be fully appeased.

Learn more about auto deductions at the IRS web site.