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What Is Better for Taxes - the Standard Mileage Deduction or Actual Expenses?

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Question: What Is Better for Taxes - the Standard Mileage Deduction or Actual Expenses?

Car/truck expenses for business travel may be deducted using either the IRS standard mileage rate or actual expenses.

Answer:

The answer to this question depends on several variables, including the number of miles driven and whether you have both personal and business vehicles. The most important variable is the number of miles driven for business during the year.

If You Drive Less Than 50% for Business
You can use the standard deduction to keep things simple and easy. Keep track of all your miles driven and multiply by the current IRS standard mileage rate for the year.

Your specific circumstances may vary, so check with your tax professional before you take the deduction.

If You Drive More Than 50% for Business
You may be able to increase your deduction by using actual expenses. You will need to keep track of all expenses with supporting documentation. Actual car expenses include:

  • Depreciation
  • Licenses
  • Lease payments
  • Registration fees
  • Gas and Oil
  • Insurance
  • Repairs
  • Garage rent
  • Tires
  • Tolls
  • Parking fees

Changing Methods
You cannot switch methods from year to year. If you did not use the standard deduction last year, you cannot use it this year.

IRS Restrictions on Using the Standard Mileage Rate:
The IRS does not allow the use of the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

Your individual circumstance may vary, so calculate your expenses both ways to see which brings you the larger deduction and check with your tax advisor before completing your business tax return.

More frequently asked questions about Business Mileage

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