If your employer gives you a car to use for business, you may be able to deduct certain expenses. Your deduction is limited to the actual expenses of operating the car that were not reimbursed by your employer. The amount of the deduction depends on the amount your employer includes in your income and the number of business and personal miles driven. Your personal use is reported annually on your Form W-2. If your employer owns the car you use, you cannot use the standard mileage allowance for car expenses.
Specific Details
The taxpayer reduced their taxable income by $5,000 by deducting certain expenses for employee use of an employer-provided car. Since the taxpayers income was taxed at the 30% tax bracket, the income reduction may decrease their income taxes by $1,500 ($5,000 x 30%).
Potential Savings
If you are in a combined (federal, self-employment, and state) tax bracket of 30%, you could reduce your taxes up to $300 for every $1,000 of income reduction by deducting certain expenses for employee use of an employer-provided car.