Mileage Deduction When You Don’t Own The Car

By Stephen Fishman on September 29, 2016 in Mileage.

Can you take a mileage deduction when you don’t own the car? This situation can come up often: you could borrow a relative’s car, renting a car while traveling or using a loaner while your car is being repaired. Let’s get to the bottom of this in this chapter of Ask the Tax Expert.

Can I take a mileage deduction if I don’t own the car?

Q. I’m self-employed and mainly work from home. I don’t have a car but occasionally, I have to drive for work. I use a relative’s car. Can I take a mileage deduction for those miles? Can I deduct parking fees?

Betsy Y., Evansville, Ind.

A. You can deduct parking when you drive for business purposes.

For example, if you drive to a client or customer’s office or other workplace, or drive to a restaurant for a lunch meeting with a client.

It gets a little bit trickier if you’re using a car you don’t own for business purposes, especially if you borrow it. Your ability to get a deduction depends on whether you pay your relative for the use of the car.

If your relative or neighbor or whoever lets you use the car for free, you get no deduction. The relative has made a gift to you, and he or she gets no deduction either.

If you pay your relative for the use of the car, you can deduct the cost as a regular business expense. This must the same as if you hired a ZipCar or Uber car for work purposes. The cost is deductible as a business travel expense.

If you wind up purchasing your own vehicle, be sure to get all the deductions you’re entitled to. The mileage deduction is a major one but don’t forget you can also deduct: interest on car loan, parking and tolls for business trips, personal property ta you paid when you purchased the vehicle.

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Stephen Fishman

Stephen Fishman is a self-employed tax expert and regular contributor to MileIQ. He has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for entrepreneurs, independent contractors, freelancers and other self-employed people. He is the author of over 20 books and hundreds of articles, and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Visit Fishman Law and Tax Files for more information on his work.