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Standard Mileage

For 2019, you can deduct 58 cents per mile driven for business purposes. The standard mileage deduction is often more advantageous because it can generate a higher deduction each year than the actual expense method. The rate changes each year and includes a standard amount for upkeep and maintenance
You’ll need to know how many total miles you drove and how many miles you drove just for business. 

Actual Expenses

The Actual Expense method allows you to take a deduction for, well, the expenses you actually paid for your vehicle during the year. This method is more involved because it requires that you keep track of what you actually spent during the year. 

  • Gas
  • Insurance
  • Lease payments
  • Depreciation
  • Tires
  • Maintenance

The actual expense method typically generates a higher deduction in the earlier years because of depreciation expense. When you purchase a vehicle and begin using it in your business you can get a deduction for the cost of the vehicle spread out over up to 5 years. If you purchase an SUV, pick up, or van and place it in service you can get a deduction for up to 100% of the cost of the vehicle in the first year (prorated based on business use). This can cause significant tax savings in the first few years. However, in later years when the vehicle is completely depreciated the actual expense method may not generate a substantial deduction.

If you finance your vehicle, you cannot deduct your monthly principal payment, only interest on the loan. Instead, you depreciate the cost of the car over several years. However, if you lease a vehicle you can deduct the cost of the actual lease payments based on your business use percentage.

Other Expenses

There are some expenses that you can deduct regardless of whether you take the standard mileage or actual expenses approach. 

  • Auto loan interest
  • Vehicle registration fees
  • Parking fees and tolls

Business Use

When it comes to taking a deduction for using your car in your business, remember this: you can only deduct the BUSINESS USE of your vehicle. This means that if you use your vehicle for both personal and business reasons you cannot deduct 100% of the miles driven or costs incurred for driving the vehicle. You’ll need to determine what the business use percentage of your vehicle is. The simplest way to do that is to keep track of your miles, even if you aren’t taking the standard mileage deduction. 

For example, if you drove 10,000 miles all year and 3,000 of those miles were related to business, your business use percentage is 30% (3,000/10,000). If you’re using the standard mileage rate, your deduction will be based on the actual miles driven and if you’re using the actual expense method you can only deduct 30% of your total deductible expenses.

Business miles include (but are not limited to) miles driven to:

  • the post office to drop off packages or check your business PO box
  • vendor events
  • trainings, conferences, and conventions
  • your hostess’s home for an in-home party or pre-party consultations
  • the store to pick up business supplies
  • temporary work locations

Business miles do not include miles driven to your regular place of business. If you rent space to act as your office or store where you meet and handle clients or customers, the miles driven from your home to that space are considered commuting miles and are not deductible.

Which Option Should I Choose?

If you chose to take the standard mileage deduction in the first year that you placed your vehicle in service, you can flip flop between standard and actual expenses in subsequent years. Each year, you’ll calculate the deduction under each method and you can choose the option that gives you the best benefit.

If you chose to take the actual expense deduction in the first year that you placed your vehicle in service, you have to stick with actual expenses – even if the standard mileage deduction provides a better benefit. Additionally, if you have a fleet of more than four vehicles that you operate at one time, you must use the actual expense deduction instead of the standard mileage deduction. This doesn’t include if you own more than 4 vehicles and just use one vehicle at a time. 

Recordkeeping

Regardless of which method you choose, you need to make sure that you’re keeping accurate records in order to support your deduction. To keep track of your mileage, you can use a physical or digital mileage log or you can use an app that automatically keeps track of your miles.

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Car and Truck Expense Deduction - Deducting the Business Use of Your Vehicle