Car expenses and public transportation expenses might be tax deductible depending on your circumstances.
First, you should know that there is a difference between “travel expenses” and “transportation expenses.” In general, if you are traveling away from your home for business, your “travel expenses” are tax deductible. That includes the cost of airfare, rental cars, taxis, buses, trains, or car expenses. (It also includes some of the costs of meals, but that is a different topic.) For your car expenses you can deduct either the actual cost of using your car, or you can deduct a standard amount per mile based on the number of miles you traveled. More on that later.
“Transportation expenses” are the costs of transportation when you are NOT traveling away from home. These are harder to deduct. If you are just going to and from your normal place of work, the expenses are not deductible. That’s just the cost of being a commuter. But if you are going from your place of work to a different place of work, those costs are deductible. If you are going from your place of work to meet with clients or customers, those costs are also deductible.
How do you determine what your deductible expenses are? The IRS says that you can either use a standard mileage rate to figure out your deduction, or you can keep track of the actual expenses and deduct those. Be careful: there are some things that prevent you from using the standard rate. Talk to a tax professional if you have any doubt. Using the standard rate, if you drove 500 miles in 2006 for legitimate business transportation needs (not commuting to and from work) you could deduct $222.5.
If you decide to use your actual expenses, you can include: depreciation, licenses, tolls, gas, oil, lease payments, insurance, garage rentals, parking fees, registration fees, repairs, and tires. But if you used that car for both business use and for personal use, you have to divide your costs up between the two based on the number of miles that you used the car for each activity.