A taxpayer determines if a vehicle is used in "business use" by evaluating whether the vehicle is used in the trade or business of the taxpayer. According to the IRS FAQ and the relevant regulations, "business use" generally means any use in a trade or business of the taxpayer. This includes any use that is directly connected with the taxpayer's business activities.
To qualify as business use, the vehicle must be used predominantly (more than 50% of its total use) for business purposes. This determination is made based on the facts and circumstances of each case. The use of the vehicle for commuting or personal purposes does not qualify as business use.
For example, if a taxpayer uses a vehicle to visit clients, attend business meetings, or transport goods for their business, these activities would be considered business use. Conversely, using the vehicle for commuting to and from work or for personal errands would not be considered business use.
The taxpayer must maintain adequate records to substantiate the business use of the vehicle. This includes keeping an account book, diary, log, statement of expense, trip sheets, or similar records that detail the amount of each business use, the total use of the vehicle, the date of each use, and the business purpose of each use.
In summary, a vehicle is considered to be used in "business use" if it is used predominantly for activities directly related to the taxpayer's trade or business, and the taxpayer maintains adequate records to substantiate this use.
Sources:
Publication 463 (2023)
§ 162. Trade or business expenses
§ 280F. Limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes
Publication 534 (11/2016)
§ 48.6421-4. Meaning of terms.
Publication 946 (2023)
