Tax Guide for Farmers – Deductible Expenses, Part 9

Portions of the Internal Revenue Code are dedicated specifically to income and expenses for those with a farming businesses. A portion of these sections addresses farming expenses related to trucks and cars. That is the subject of this article.

This article is the ninth in a series on deductible business expenses associated with a farming business. The previous articles on deductible expenses covered Prepaid Farm Supplies, Prepaid Livestock Feed, Hired Labor, Interest, Taxes, Insurance, Rent and Leasing, and Business Use of Your Home.

Truck and Car Expenses

You are allowed to deduct truck and car expenses from your farming income using two methods.

Actual Costs

You can deduct the actual costs related to operating a truck or car used in your farming business. If you use the truck or car for your farming business as well as personal use, only the costs related to your farming business are deductible. These costs include but may not be limited to depreciation, gasoline, insurance, licensing, oil, registration, and repairs.

Standard Mileage

Alternatively, you can in certain circumstances deduct the mileage you drive your truck or car related to your farming business using a standard mileage rate. The standard mileage rate for the 2015 tax year was 57.5 cents per mile.

You can use the standard mileage rate if the vehicle is a car, panel truck, pickup, or van that you own or lease. You cannot use the standard mileage rate if you use five or more trucks or cars in your farming business at the same time. You are not considered to be using the vehicles at the same time if you alternate their use, using them at different times throughout a given timeframe.

For example, Joe owns a car, a van, and three pickup trucks that are all used in his farming business. Joe uses the car while his employees use the van and three pickup trucks. In this case, Joe cannot use the standard mileage rate because five separate individuals are using the vehicles at the same time. Joe must instead deduct the actual costs associated with using all five vehicles.

Business Use Percentage

You can claim up to 75% of the use of a car or truck as part of farming business use without maintaining any records, so long as you use the vehicle during a majority of a normal business day for activities directly associated with your farming business.

Activities directly associated with your farming business can include but may not be limited to:

  • Cultivating land
  • Driving to the feed or supply store
  • Raising or harvesting an agricultural or horticultural commodity
  • Caring for, feeding, managing, raising, training, or shearing animals

You must determine the method by which you will determine the amount of business use for a vehicle during the first year the vehicle is placed into service. Once you make this election, you may not change the method during a subsequent year of use.

If you do maintain records of the amount of your farming business use of a vehicle and the amount is greater than 75%, you may be able to claim the entire amount. Your records must not be estimates but rather specific records supported by receipts. It is typically wise to obtain supporting documentation for each expenses at the time you pay for it.

Who can answer any other questions I have about deductible farming expenses?

A tax attorney can answer your questions about deductible farming expenses, whether those pertain to trucks and cars or other business expenses. Only a tax attorney has the training and experience to answer these questions while offering you the protection of attorney-client privilege.

You can speak with a tax attorney by calling the telephone number at the top of this web site or by completing the form below. The first consultation with a tax attorney is completely free of charge, so you have every reason to get in touch with a tax attorney today.

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by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.