I am considering buying or leasing a car for my small business. I already have a personal vehicle in my name that is owned by the bank. Can I use this car for my company, or do I have to buy or lease a new vehicle at a car dealership? —C.H., Washington State Yes, you can use your current automobile for your small business. It's the most cost-effective approach, because you won't need to buy another car. There are a couple of ways to go about this. You could sell or contribute the car to your business and report your personal use as compensation or "other income" on your personal income tax return. The business would receive the available deductions for the depreciation and operation of the car, as well as the interest expense on your bank loan. Your other option is to continue your personal ownership of the vehicle and charge the business for any miles you drive for business purposes. If you do this, you'll pay all of the costs of ownership and operation of the vehicle yourself, says Robert C. Gellman, managing director of the tax practice at the San Diego CBIZ (CBZ) office. Under either scenario, consult with your accountant or tax preparer to make sure you get the details right. Allowable deductions related to business use of vehicles are listed in IRS Publication 463. You'll also need to keep a mileage log and allocate your expenses between business and personal use, tracking the miles you drive for each purpose. "Business use" does not include commuting between home and your place of business. And you should review your business property and casualty insurance to make sure that using the car for business purposes is covered, Gellman says. Accounting for ExpensesTaxpayers using an automobile for business purposes can account for the expenses by adding up all the actual expenses or by using the standard mileage method, says Brad Hall, managing director of Hall & Co. CPAs in Irvine, Calif. "One method of doing this would be to use the cents-per-mile approach," he says, multiplying the number of miles you drive by the IRS mileage rate. In 2009, that rate is 55¢ per business mile. The IRS announced this month that the rate will decrease to 50¢ per mile in 2010. Actual auto expenses include vehicle depreciation, gas, oil, lease payments or interest, insurance, registration fees, repairs, tires, parking fees, and tolls. Even if you use the cents-per-mile standard rate, you still can deduct interest on the auto loan, auto registration fees, and the cost of business-related parking fees and tolls. Talk to your accountant about which expensing method will derive the maximum tax benefit for you. If you are thinking about buying a new car for the business, Hall says, you should consider that the 2008 economic stimulus legislation increased the first year's depreciation deduction by $8,000 for a new vehicle placed in service. To qualify, a new car must have been purchased for at least $18,266 and a new truck, van, or SUV under 6,000 lb. must cost at least $18,433. "The auto also has to be used more than 50% for business to qualify for the additional deduction," Hall says, and "the total depreciation deduction will be reduced for percentage of personal usage."