Deducting mileage and car expenses Tax Talk by George Saenz • Bankrate.com

Dear Tax Talk,
Regarding the mileage deduction for non-reimbursed travel expenses, is it correct that I can, in addition to the 40.5 cents per mile driven, also write off the interest the bank has charged me in 2005, on the financed vehicle? Thank you.
-- Tom

Dear Tom,
For 2005, the standard mileage rate for the cost of operating your car for business use is:

If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance or vehicle registration fees.

If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then in later years, you can choose to use either the standard mileage rate or actual expenses. (However, your depreciation deduction would be figured differently if you had used the standard mileage rate in an earlier year for the same car). If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period.

If you are an employee, you cannot deduct any interest paid on a car loan. This applies even if you use the car 100 percent for business as an employee and whether you use actual expenses or the standard mileage rate.

However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car even if you use the standard mileage rate. For example, if you use your car 60 percent for business, you can deduct 60 percent of the interest on Schedule C (Form 1040).