If you’re renting a car, you can’t take the standard mileage deduction. You can deduct the actual expenses of a business rental.
Table of Contents
- Why can’t you deduct mileage for a rental car?
- What rental car deductions can you deduct?
- Can you deduct rental car expenses for a mixed business and personal trip?
- Where can you get help with this?
Why can’t you deduct mileage for a rental car?
The reason you can’t take the standard mileage deduction for a rental car is because the deduction is for cars that you own. That’s just the way the tax rules work.
The costs of renting a car are different than the costs of owning a car. It’s just like how you can’t claim the standard mileage deduction for motorcycles, because the cost of owning a motorcycle is different than the cost of owning a car.
The standard mileage deduction includes costs like depreciation and maintenance — expenses you don’t pay when you’re renting a car. There’s no special standard mileage deduction rate for a car you rent instead of own.
What rental car deductions can you deduct?
If you’re on a business trip, you can generally deduct all of the costs of renting a car. These include:
- The rental charges
- Additional charges like insurance
- Charges for damage or cleaning
The one thing you typically can’t deduct is traffic violations or parking tickets. Under federal law, receiving a fine for breaking the law is a personal expense with no deduction allowed.
Can you deduct rental car expenses for a mixed business and personal trip?
If you’re combining a personal vacation with a business trip, the rules are a little different. Generally, you can only deduct the business portion of your expenses.
For example, if you fly into a city for seven days and take two personal days, you can deduct five days of rental car fees. If you paid tolls, it would depend on what you were doing at the time of each toll.
For gas, you can generally choose one of the following options:
- Divide by the number of days
- Go by the number of business versus personal miles
- Fill up when you switch between business and personal so you have separate receipts.
For long trips, the rules work a little differently. You might spend one or more days driving to your destination without doing any business or personal activities. The general rule is that you can deduct your rental car expenses while traveling if you spend more than half of your trip on business activities.
For example, if you drive from Boston to Florida and spend one day on business and five days at Disney World, you can only deduct your rental car expenses on that one day you did business. If you flip it around and only spend one day at Disney World, you can deduct the daily rental car fees and gas while driving to and from Florida even if you go to Disney on the first or last day of your trip.
Where can you get help with this?
If you know your business expenses, it’s easy to add them to your Schedule C when you use tax filing software to complete your tax return. If you need help tracking your business expenses, check out these accounting software options.