If you wish to get a tax deduction for car repair you may need to prove that your car is used solely for your job or business. You can deduct the entire cost of usage when you file your taxes. However, if you drive your car for personal use as well, you are only allowed to deduct the cost of business use and repairs, among other tax deductible items.
1 - Claiming
You may not claim a deduction for car repairs if your car is for personal use, but for further information or clarification check with the IRS or your tax specialist. If you qualify to claim expenses on your car under the Actual Expense Method you can claim deductions for repairs. Speak to your accountant about the best methods of doing this and ask advice for what paperwork to keep.
2 - Methods
The Actual Expense Method means that in order to qualify you need to determine what the actual costs are to operate the car for the purpose of business use. This also includes fuel, repairs, tires, oil, insurance, registration fees, licenses and depreciation involved solely with business mileage use. One thing note is that you cannot use this method if you lease your car. You must use the Standard Mileage Rate.
3 - Proof
You are required by law to show proof of your expenses by keeping adequate records. Receipts for repairs to the vehicle should be kept in date order with the oldest at the bottom and the newest at the top, for easy reference. Keep your record of repairs clear and easy to follow. If you keep a duplicate record on your computer, always ensure that the original receipts are accompanied with the associated paperwork.
4 - Self Employed
If you are self employed you can claim tax deductible repairs and vehicle expenses are on Schedule C, but take advice from your tax consultant to make sure you are claiming the correct amount and doing the correct actions.
5 - Employed
If you are an employee, your vehicle repairs and expenses should be reported using Form 2106. This deduction is subject to the 2% adjusted gross income limit. This means that non-reimbursed employee expenses are deductible but you won't receive a full deduction on your tax returns.
6 - Your Vehicle
Your vehicle can prove to be an asset in terms of claiming a rebate on your taxes. You could claim a tax deduction for a hybrid car if it is a low emissions vehicle. It could fall under a clean burning engines car tax rebate category, so ask your tax adviser if you can claim a rebate.
7 - Charity Work
If you have used your car for charitable use, your expenses and repairs are reported using the Schedule A along with any other charitable donations you may have made during the tax year.
8 - Lease
You can only claim a tax deduction for car repair if you own the car in question. If the car is leased to you by a leasing company, usually the leasing company will be responsible for carrying out any repairs on the vehicle. If your circumstances are outside of this situation and you are in fact responsible for paying for repairs to your car, then you should ask your tax adviser or check online with the IRS help pages.