Mileage deductions can feel complicated when first starting out, especially if you’re not the official owner of your vehicle. This begs the question: can I deduct mileage if I don't own the car? The short answer is: it depends. You can deduct mileage without owning a car, but only in certain situations.
One of those situations is if you're married to the owner of the vehicle. In this case, you can certainly deduct mileage without owning a vehicle. You need only consider the purpose of the trip to check whether it's a legitimate deduction or not.
But before we go any further, remember that, ultimately, tax deductions on your car expenses are only valid if it's used for business or work. This includes buying supplies for the company, going to work meetings, or driving clients around.
IRS rules state that it cannot be deducted if your mileage is used for personal purposes. That includes commuting miles, or the travel from your house to your office, even if it feels like that driving is for work purposes.
If the primary purpose of a trip is for business (for example, you need to buy supplies or visit a customer on-site), then it can be subject to mileage deduction. You can include some personal errands in your trip, as long as 50% or more of the trip is for the business.
But some of you out there may be wondering “can I deduct mileage if I don't own the car and I’m not married to the owner?” This question becomes more complicated in these scenarios.
Generally, though, the answer is no — you can't deduct mileage if you don't own the car, regardless of whether you used it for business purposes. However, there's a small caveat even if you can't claim it as a mileage deduction.
If you pay someone to use their car or drive you to your business errands, then you can use that payment (but not the mileage driven) as a legitimate deduction. But the person who received the payment must also report that as income in their tax declarations.
However, the question of "can I deduct mileage without owning the car?" doesn't end there. Whether you own the car or not will also impact which method you'll use to file with the IRS. There are generally two methods the IRS recognizes for calculating mileage reimbursement deductions: the standard mileage rate and the actual expense method.
The standard mileage rate method allows you to use a mileage rate set by the IRS every year. For example, the 2021 rate was 56 cents per mile. In other words, if you want to claim 50 miles worth, then you simply multiply that by 56 cents to get a deduction of $28. In case you’re wondering, the 2022 rate is 58.5 cents per mile.
The actual expense method, on the other hand, is more involved. It requires you to list out all the expenses that go into owning the car, including repairs.
The standard rate is the simplest to use because you only need to track the mileage of your trips. However, it doesn't allow you to include the cost of operating the car (like fuel and repairs) when claiming for a deduction.
Now, the question of "can I deduct mileage if I don't own the car?" becomes more involved since it will also determine which method you use. Generally, you can choose either method if you own the vehicle you're driving, but only for the second year of ownership onwards. In the first year, you're only restricted to the standard mileage method. Also, you must also use only a maximum of five cars at a given time to qualify.
So this now brings us to the question: can I deduct mileage if I don't own the car, but if I lease it? The same rules also apply if you lease the vehicle. In this case, you can only use the standard mileage method during the entire lease period.
To start, you should actively monitor your mileage at all times, which can make reporting easier. In fact, IRS rules state that you should do so immediately after your trip if possible. The best way to do this is with a mileage app on your smartphone, like MileIQ’s mileage tracker app.
If you track every trip properly, it will be easy to determine which portions of your trips are business and which personal. This, in turn, will make it straightforward to calculate the business mileage come tax season.
For example, let's say you've driven a total of twenty trips. For simplicity's sake, let's make each trip approximately 20 miles. Of those twenty trips, your log shows that 12 are for business purposes and the rest personal. So in this example, you have a total business mileage of 240 miles.
Assuming you qualify for the standard mileage method, you simply need to multiple 240 miles by the IRS rate. For 2021, that's 56 cents. So calculating it gives us a total of $134.40, which is the deduction you can claim with the IRS.
As you can see, the answer to "can I claim car expenses if the car is not in my name?" is generally no. However, this is just general advice, and it's best that you consult with a tax expert or attorney to confirm what’s best to do in your situation.