Buying and Leasing

• When you obtain a car for your business, the Internal Revenue Service allows you to deduct some of the costs associated with buying. If you buy the car with a loan, the IRS allows for a deduction of the interest that you pay for the purchase. If you lease the vehicle for your business, you get to deduct the entire amount of your lease payment from your company's taxable income for the year.
  
  

Business and Personal Use

• If you use your vehicle for both business and personal purposes, the IRS requires you to allocate a portion of the use for each purpose. For example, if you use the vehicle half of the time for business and half of the time for personal purposes, the IRS only allows you to deduct half of the expenses for the car. Personal use of a vehicle is not deductible.
  
  

Mileage

• When it comes to deducting the business use of your car, one of the methods that the IRS allows is the mileage method. With this approach, you keep track of how many miles you drive for business purposes. This typically requires you to keep a logbook. You keep track of the miles that you drive each time you make a business trip. Then when you file your taxes, you get to take a deduction for each mile that you drive for business purposes.
  
  

Expenses

• Another way that you may choose to deduct the business use of your car is to deduct actual expenses related to maintenance. For example, with this approach, you add up all of the costs associated with maintenance such as oil changes, gas, wiper fluid, tire rotations and repairs. Then you take a deduction for all of these costs at the end of year. With this approach, you must keep a file with receipts for these purchases.