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Claiming Auto Repair Expenses as Tax Credit

  Sanjiv Gupta CPA  Published 
Claiming Auto Repair Expenses as Tax Credit

Expenses for car or auto repairs can be considered as tax deductions, subject to certain limitations and rules. Before you start filing your tax return, here are some important points that you should know about.

  • The burden of proof lies on the shoulders of the taxpayer. He has to prove that
  • The car was used for business purposes or, if the taxpayer is an employee, the car was used in the conduct of his job;
  • There was actual damage to the car that rendered it in need of repair;
  • The taxpayer has incurred expenses to have the damage repaired and bring the car back in working condition.

In cases where the car was both for personal and business use, the only amount eligible for tax deductibility would be that which pertains to the business purpose of the vehicle. Therefore, car repairs must be clearly separated or distinguished according to their uses or purposes.

  •  In order to be able to claim deductions for car or auto repairs, the individual must have qualified to do so under the Actual Expense method, as opposed to the Standard Mileage Rate, which does not consider the actual cost of repairs and maintenance.
  •  Individuals must keep adequate to complete records of all expenses incurred on the repairs of the car. These include copies of receipts, invoices, and job order documents. File them chronologically, for easier access later on when claiming for the deduction. Note that you will only be allowed to deduct those that are supported by these valid documents.
  •  If the taxpayer is an employee using your car for business purposes, the amount that can be deducted would only be the amount that was not reimbursed by the employer. Record-keeping is also essential. Employees should maintain records of expenses on car repairs. Records of the reimbursements made to them by their employers for said repairs should also be kept. This is so that it will be easier to identify the amount not reimbursed, and can be claimed as deduction from tax later on.
  •  It does not just repair for damages that may be considered for tax credit purposes. Even repairs that have to be made in order to pass state laws or regulations, such as emission tests and smog tests, may also be claimed for deduction.
  •  Individuals who have claimed these expenses as tax deductions are also advised to keep these pertinent records for a period of 3 to 5 years, even 7 years, in case post-audit processes call for them.

Of course, it goes without saying that the best option would still be to keep your car in good working condition to avoid the need to have it repaired or undergo overhauls. This will definitely save you the high cost of repairs and maintenance. However, in the event that they are unavoidable, you can still claim them as tax deductions, as long as you have records and proof to show when filing your tax return.