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Standard Mileage or Actual Expenses Deduction

Folks who use their vehicles for business or have vehicles dedicated to business can deduct the mileage for business travel. There is a standard mileage deduction that can be claimed on your tax return, as well as an actual expense option. Which is better? Read on to decide for yourself.

If you use a car, truck, van, or other vehicle to conduct your business, you are entitled to a deduction for the business miles that you drive. Since the government is strict on mileage for business as opposed to personal use for vehicles that do double duty, keep good records of gas receipts and odometer readings.

Business mileage is restricted to travel between the business office and other residences, or places of business for business reasons. You can drive to the post office from the business office to mail packages to clients. A vehicle can travel from a warehouse where products are stored to a client’s home for delivery.

Vehicles that are used for business and personal use must split the cost of the mileage deduction for tax purposes. If the car is used for business sixty percent of the time, then sixty percent of the mileage cost can be claimed on a tax return. Keeping a mileage log in the car can eliminate confusion when it comes to determining the mileage deduction.

There are two types of mileage deductions for business: standard mileage and actual expenses. The standard mileage for this tax filing year and going forward is 48.5 cents per mile. Only one mileage rate can be deducted in a certain tax year.

The best way to determine which will be the larger amount is to compare the two figures. For the actual car expenses, lease payments, depreciation, maintenance, repairs, insurance, and registration fees can be included in the actual expense deduction. A business that owns more than one vehicle such as a limousine service or moving company can calculate actual car expenses.

Standard mileage must the claimed the first year that you use a car for your business. After the first year, you can choose either option. The standard mileage option is not allowed when five or more cars are used in your business at the same time. If less than that number of cars are used one at a time or simultaneously, the standard mileage deduction can apply.

The standard mileage rate has limitations. It can’t be used if the vehicle in question is a taxi, or is used as a mail carrying vehicle, or you have claimed any other depreciation or deduction for the vehicle. Cars leased before the end of 1997 have to use the standard mileage rate for the entire period of the lease.

It is okay to calculate the two amounts and then decide. Whatever decision you make for a given year is locked in but you can switch between the two in future years that the vehicle is in use for your business. Standard mileage is easier, but actual expenses may net a higher deduction.

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