CashoutGlossary / Business-use percentage
Business-use percentage
The share of a car's total miles for the year that were for business, used to split costs like gas and insurance between business and personal use.
Your business-use percentage is the part of a car's use that was for business. For a car, it's measured in miles: business miles divided by total miles for the year.
It matters most under the actual expense method. If you use the car for both business and personal driving, you can deduct only the cost of its business use, so the percentage is applied to your gas, insurance, repairs and the rest. The IRS example in Publication 463 is a contractor who drove 20,000 miles, 12,000 of them for business, and can claim 60 percent of the cost of operating the car.
To back up the number you need two figures. Business miles come from your mileage log. Total miles are easiest to get from your odometer at the start and end of the year. The tax regulations list both the amount of each business use, measured in mileage for a car, and the total use for the year as things you must be able to prove.
The common mistakes:
- Counting your commute as business. Driving between home and your regular place of work isn't deductible, no matter how far it is.
- Picking a round number at tax time, like 90 percent, with no log behind it. A percentage you can't support with records is hard to defend.
- Using last year's percentage. Your driving changes, so figure it fresh each year.
Related terms
Actual expense method · Mileage log · Mileage deduction · Standard mileage rate
