How to treat miles driven to the mechanic, gas station, etc when calculating business use of car?
I contacted Stephen Fishman, J.D., the author of Home Business Tax Deductions, to let him know that this question was missing from his book. He was kind enough to send a reply. My original phrasing of the question: If your car is used for both business and personal use, and you deduct via the actual expense method, do trips to the mechanic, gas station, and auto parts store to service or repair the car count as business miles, personal miles, or part-business-part-personal miles? What about driving the newly-purchased car home from the dealership? And his response: Good question. I can find nothing about this in IRS publication or elsewhere. However, common sense would tell us that the cost of driving to make car repairs should be deductible. If you use your car for business, it is a business expense, just like transporting any other piece of business equipment for repairs is a business expense. This should be so whether you use the standard mileage rate or actual expense method. You should probably reduce the amount of your deduction by the percentage of personal use of the car during the year. The same goes for driving a car home from the dealer. Alright, IRS Publication 463: Travel, Entertainment, Gift, and Car Expenses Business and personal use. If you use your   car for both business and personal purposes,   you must divide your expenses between business   and personal use. You can divide your expense   based on the miles driven for each purpose. Example. You are a sales representative   for a clothing firm and drive your car 20,000   miles during the year: 12,000 miles for business   and 8,000 miles for personal use. You can   claim only 60% (12,000 ÷ 20,000) of the cost of   operating your car as a business expense Obviously nothing helpful in the code.  So I would use option 1, weight the maintenance-related mileage by the proportion of business use.  Although if you use your car for business a lot (and perhaps have a spouse with a car), an argument could be made for 3.  So I would consider my odds of being audited (even lower this year due to IRS budget cuts) and choose 1 or 3. And of course never throw anything away until you're room temperature. Since you are using the percentage method to determine the home/business use split, I would think that under most circumstances the distance driven to get your car from the dealership to home, and from home to mechanic and back would be less than 1% of the total miles driven. This is an acceptable rounding error. When refueling, I typically do that on my way to another destination and therefore it's not something I count separately.  If your miles driven to attend to repair/refueling tasks are more than 1% of the total miles driven, split them as you feel comfortable in your above examples. I'd calculate the B/P percentages as total miles less maintenance miles, then apply that split to maintenance miles as well.
I agree with the previous comments one thing that got brought up a while back when I was looking into purchasing a Prius was the battery replacement, someone once told me it was very expensive in the event it failed and needed to be changed, I'm not talking about the 12 volt but the big nickel metal hydride one. Another thing to factor is the gas that you will save, normally the Prius get double the gas milage of that of civic or a corolla but unless you drive a bunch of miles per day you really don't see the pay off.  Also if you can pull a CarFax on the car, the 20 dollar investment is worth it because you can find out if it was in an accident or if it's a lemon! I once bought a bmw and didn't do a CarFax and later ended up finding out that the car had more owners than a taxi had customers.  Also just like said above 200k car vs 100k doest always mean the 100k is better off, especially if the previous owner never services it well. Get the car checkout before you make the deal to buy. Hot dogs - counts as part of the food basket. Hardly one-off.   Cars - maybe could be included. On average, people buy cars every 5 years, so 12 cars for an 80 year old.   Gas - that one could well be warranted, the problem is the high volatility and the fact that fluctuations are not due to inflation, but rather commodity price fluctuations.   All the other stuff (phones, tv’s, Appliances, etc) is stuff that needs to be replaced several times throughout a persons life, so not one-off purchases.   House prices can and should address d through other mechanisms that have nothing to do with inflation. Either through better planning codes or macro prudential measures, but certainly not through manipulating interest rates. Every reward program has to have a funding source. If the card gives you x percent back on all purchases. That means that their business is structured to entice you to pump more transactions through the system. Either their other costs are lower, or the increased business allows them to make more money off of late fees, and interest. If the card has you earn extra points for buying a type of item or from a type of store (home stores improvement in the Spring), they are trying to make sure you use their card for what can be a significant amount of business during a small window of time. Sometimes they cap it by saying 5% cash back at home improvement stores during the spring but only on the first $1500 of purchases. That limits it to $75 maximum. Adding more business for them, makes more money for them. Groceries and gas are a good year round purchase categories. Yes there is some variation depending on the season, and the weather, but overall there is not an annual cliff once the season ends. Gas and groceries account for thousands of dollars a year these are not insignificant categories, for many families are recession proof. If they perceive a value from this type of offer they will change their buying behavior.  My local grocery store has a deal with a specific gas station. This means that they made a monetary deal. Because you earn points at the grocery store and spend points at the gas station, the grocery store is paying some compensation to the gas station every time you use points. The gas station must be seeing an increase in business so theoretically they don't get 100% compensation from the grocery store.  In cases where credit cards give airline miles, the credit card company buys the miles from the airline at a discount because they know that a significant number of miles will never be used. "I know, this isn't a direct answer to your question about unloading a used car-- I've always donated it to charity and written off the price it got at auction on my taxes -- but I think the following might be useful to anyone facing a big repair bill: You know your car's condition. (If in doubt, pay your mechanic to evaluate it ""as if he was considering buying it for his daughter"".) If you were shopping for a used car, and you found one exactly like yours, in exactly the same condition, treated exactly as well as you treat yours (and with all the records to prove that), but with the repairs already done... how much would you be willing to pay for it? If that number is more than the repair cost, repairing is a good deal.  If it's less than the repair cost, is it enough less to justify the hassle of car shopping? If so, unload it and use the repair money to buy something better. If it's in the middle... flip a coin, or pick whichever makes you feel better." Too calculate these values, information contained in the company's financial statements (income, balance, or cashflow) will be needed along with the price.  Google finance does not maintain this information for BME.  You will need to find another source for this information or analyze another another symbol's financial section (BAC for example). I don't believe you would be able to with only Net Sales and COGS.  Are you talking about trying to estimate them?  Because then I could probably come up with an idea based on industry averages, etc.  I think you would need to know the average days outstanding, inventory turnover and the terms they're getting from their vendors to calculate actuals.  There may be other ways to solve the problem you're asking but thats my thoughts on it. "Here I thought I would not ever answer a question on this site and boom first ten minutes.  First and foremost I am in the automotive industry, specifically one of our core competencies is finance department management consulting and the sales process both for the sale of the care as well  as  the financial transaction. First and foremost new vehicle gross profits are nowhere near 20% for the dealership.  In an entry level vehicle like say a Toyota Corolla there is only a  few hundreds of dollars in markup from invoice to M.S.R.P.  There is also something called holdback that dealers get for achieving certain goals such as sales volume. These are usually pretty easy to hit. As a matter of fact I have never heard of a dealer not getting the hold back on a deal.  This hold back is there to cover overhead for the car, the cost of getting it ready to sell, having a lot to park it on, making it ready for delivery, offset some of the cost of sales labor  etc.  Most dealerships consider the holdback portion of the invoice to not be part of the deal when it comes to  negotiations.  Certain brands such as KIA and Chrysler have something called ""Dealer Cash"" these payouts are usually stair stepped according to volume and vary by dealer, location, past history, how the guys at the factory feel that day and any number of combinations.  Then there is CSI or Customer Service Index payments, these payments are usually made every 1/4 are on the Parts Statement not the Sales Doc and while they effect the dealers bottom line they almost never affect the sales managers or sales persons payroll so they are not considered a part of the cost of the car.  They are however extremely important to  the dealer and this is  why after you have your new car they want you to bring in your survey for a free oil change or something.  IF you are going to give a bad survey they want to throw it away and not send it in, if you are going to give a good survey they want to  make sure you fill it out correctly.  This is because lets say they ask you on a scale of 1-10 how was your sales person and you put a 9 that is a failing score. Dumb I know but that is how every factory CSI score system I have seen worked.  According to NADA the average New Vehicle gross profit including hold back and dealer cash is around $1000.00.  No where near 20%.  Dealerships would love it if they made 20% on your new F250 Supercrew Diesel at around $50,000.00.  One last thing there is something on the invoice called Wholesale Finance Reserve.  This is the amount of money the factory forwards to the Dealership to offset the cost of financing vehicle on the floor plan so they can have it for you to look at before you buy.  This is usually equal to around 3 months of interest and while you might buy a vehicle that has been on the lot for 2 days they have plenty that have been there much longer so this equals out in a fair to middling run store. General Mangers that know what they are doing can make this really pad their net profit to statement. On to incentives, there are basically 3 kinds.  Cash to customer in the form of rebates, Dealer Cash in the form of incentives to dealerships based on volume or the undesirability of a vehicle, and incentive rates or Subvented leases.  The rates are pretty self explanatory as they advertised as such (example 0% for 60 Months).  Subvented Leased are harder to figure out and usually not disclosed as they are hard to explain and also a source of increased profit.  Subvented leases are usually powered by lower cost of money called a money factor (think of it as an interest rate) that is discounted from the lease company or a subsidized residual.  Subsidized residuals are virtually verboten on domestic vehicles due to their poor resell values.  A subsidized residual works like this, you buy a Toyota Camry and the ALG (automotive lease guide) says it has a residual at 36 months of 48%.  Well Toyota Motor Credit says we will give you a subvented residual of 60% basically subsidizing a 2% increase in residual.  Since they do not expect to be able to sell the car at auction for that amount they have to set aside the 2% as a future expense.  What does this mean to you, it means a lower payment.  Also a good rule of thumb if you are told a money factor by your salesperson to figure out what the interest rate is just multiply it by 2400.  So if a money factor is give of .00345 you know your actual interest rate is a little bit lower than 8.28% (illustration purposes only money factors are much lower than that right now). So how does this save you money well a lease is basically calculated by multiplying the MSRP by the residual and then subtracting that amount from the ""Capitalized Cost"" which is the Price paid for the car - trade in + payoff + TT&L-Rebate-Down Payment.  That is the depreciation.  Then you divide that number by the term of the loan and you have the depreciation amount.  So if you have 20K CC and 10K R your D = 10K / 36 = 277 monthly payment.  For the rest of the monthly payment you add (I think been a long time since I did this with out a computer) the Residual plus the CC for $30,000 * MF of .00345 = 107 for a total payment of 404 ish.  This is not completely accurate but you can use it to  make sure a salesperson/finance person is not trying to do one thing and  say another as so often happens on leases. 0% how the  heck do  they make money at that, well its simple.  First in 2008 the Fed made all the ""Captive"" lenders into actual banks instead of whatever they were before.  So now they have access to the Fed's discounting window which with todays monetary policies make it almost free money.  In the past these lenders had to go through all kinds of hoops to raise funds and  securitize loans even for super prime credit.  Those days are essentially over.  Now they get their short term money just like Bank of America does.  Eventually they still bundle these loans and sell them.  So in the short term YOU pay for the 0% by giving up part or all of your rebate.  This is really important DO NOT GIVE up your rebate for 0% unless it makes sense to do so.  When you can get the money at 2.5% and get a $7000.00 rebate (customer cash) on that F250 or 0% take the cash.  First of all make the finance guy/gal show you the the difference in total cost they can do do this using the federal truth in lending disclosures on a finance contract.  Secondly how long will you keep the vehicle?  If you come out ahead by say $1500 by taking the lower rate but you usually trade out every three years this is not going to work.  Also and this is important if you are involved in a situation with a total loss like a stolen car or even worse a bad wreck before the breakeven point you lose that price break.  Finally on judging what is right for you, just know that future value of the vehicle on for resell or trade-in will take into effect all of these past rebates and value the car accordingly.  So if a vehicle depreciates 20% a year for the first 3 years the starting point will essentially be $7000.00 less than you actually paid,  using rough numbers. How does this help the dealers and car companies?  Well while a dealer struggles to make money on new cars the factory makes all of their money on the  new cars and the new car financing.  While your individual loan might lose money that money is offset by the loss of rebate and I think Ford does actually pay Ford Motor Credit Company the difference in the rate.  The most important thing is what happens later FMCC now has 2500 loans with people with perfect credit.  They can now use those loans to budle with people with not so perfect credit that they financed at 12%-18% and buy that money with interest rates in the 2%-3% range.  Well that is a hell of a lot of profit.  'How does it help the dealership, well the more super prime credit they have in their portfolio the more subprime credit the banks will buy for them.  This means they have more loans originated that are more profitable for them.  Say you come in for the 0% but have 590 credit score, they get FMCC to buy the deal because they have a good portfolio and you win because the dealer gets to buy the money at say 9% and sell it to you at say 12% making the spread.  You win there because you actually qualified for a rate of around 18% with a subprime company like Santander or Capital One (yes that capital one) so  you save a ton on your overall cost of the car. Any dealership that is half way well run makes as much or money in the finance and insurance office than the rest of the dealership.  When you factor in what a good F&I Director can do to get deals done with favorable terms that really goes up.  Think about that the guys sitting a desk drinking coffee making more than the  service department guys all put together. Well that was long winded but there I broke down the car business for whoever read this far." I, for one, am very surprised that Tesla doesn't have a warranty exception for high mileage commercial use.  Tesloop's cars rack up over 75000 miles per year at the low end.  Sure, the data collected is valuable for product durability testing and Autopilot mapping right now, but there has to be a limit somewhere.