Can you deduct all or just some vehicle expenses when you are paid a fixed fixed auto allowance in box 1?

This get complicated. First of all if you are not a home or condo owner you may not have enough itemized deductions to be larger than your standard deduction.

There are two ways to compute vehicle business expenses.

One is to use the business mileage and multiply it by the 2007 mileage rate which is about 50 cents per mile.

The second is to keep track of ALL your expenses for the year. gas, insurance repairs and take a percent based on business use.

For example if your total car expenses for the year was $5000 and you used it 20% for business you would have $1000. But then you would have to subtract what your employed gave you for auto allowance.

Finally if you have have some unreimbursed mileage expenses you subtract two percent of your income and add it to your itemized deductions.

I would recommend that you consult an experienced tax preparer.