Can I deduct oil changes?

November 12, 2020 by Steve Banner, EA, MBA
Oil Change

There is a very good chance that you can indeed deduct the cost of your oil changes if you use your car or truck for business purposes. But before we go any further down that road, we should point out that deducting actual oil change expenses might not be the best path to take in your situation.

How to Deduct Vehicle Expenses


First, let’s back up a little and talk about who exactly is allowed to deduct their vehicle expenses. Until 2018, employees used to be able to deduct any of their work-related car expenses that were not reimbursed by their employer. However, this deduction has been suspended until at least 2026 for everyone except members of the Armed Forces, qualified performing artists, and certain state or local government officials. But this change did not affect self-employed individuals, and these folks can continue to deduct expenses for the use of their vehicle for work purposes just as they did in earlier years.
 

If you fall into one of the above categories that allows you to deduct your vehicle expenses, then this brings us to a fork in the road where we must decide how to claim those expenses. You can choose to either claim the standard amount per mile set by the IRS or use your actual expenses. Here’s a quick summary of your options:
 

  1. Standard mileage rate. You can claim a flat amount of 57.5 cents as a deduction for every mile you drove during 2020 for work purposes. This amount is meant to cover your gas, oil, repairs, registration, insurance, and other vehicle running costs. 

     

  1. Actual expenses. If you use this method, you would claim the actual amounts you spent using your car for business, rather than the approximation of those costs that the standard mileage rate provides. Your deduction using this method is calculated by multiplying your total costs by the percentage of your business use of the vehicle during the year. (Business use percentage = business miles ÷ total miles). 

 

Decide which Deduction Method Works Best for You


Although you are free to choose either method, it may be worthwhile to look at your particular case and decide if one method works better for you than the other. For example, if you have a high percentage of business use of an older vehicle that gets poor fuel economy and requires more costly repairs, then the actual expense method might be best for you. On the other hand, the standard mileage rate would work best if you have a fuel-efficient modern vehicle that requires very little maintenance. No matter which method you choose, it is very important to keep an updated logbook of miles and expenses, including receipts, in case the IRS ever questions your deduction.

 

If you choose to use the standard mileage rate for the first year the car is available for business use, you are free to swap to the actual expense method in the next year and then back to the standard rate in the following year if you so decide.
 

On the other hand, if you choose the actual expense method for the first year of the vehicle’s use for business, you must continue using the actual expense method for that vehicle in all future years of business use.
 

But no matter which way you go, the costs of your oil changes are always included in your deduction – either indirectly through the standard mileage rate or directly through the actual expense method. 

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Steve Banner, EA, MBA
Tax Content Developer

 

Steve Banner began his career in the field of income tax in 1977 and has since gathered business experience in a variety of countries and cultures. In addition to the United States, he has lived and worked for extended periods in Australia, Saudi Arabia, Canada, and Sweden. Along the way he studied Adult Education and earned a Bachelor of Education, Master of Educational Administration, and MBA. He joined TaxAudit in 2016, where he is a Tax Content Developer.


 

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