Standard Mileage Rate vs. Actual Vehicle Expenses
If your business revolves around the use of your vehicle, such as rideshare, the vehicle’s business-related expenses are probably your most significant deduction. You can calculate this deduction by EITHER multiplying the current standard mileage rate ($0.545 per mile) by the number of business miles driven OR by adding up actual vehicle expenses. If your vehicle is for both business and personal use, you will need to allocate the appropriate portion of total vehicle expenses for the business deduction. This is usually done by multiplying the total expense amount by the ratio of business miles to total miles driven for the year.
The standard mileage rate is just a simplified way to calculate your vehicle business expense deduction. The method you choose to use, standard mileage rate OR actual vehicle expenses, depends on whether you used the standard mileage rate for the first year of vehicle business use, you used straight-line depreciation when deducting actual expenses in prior years, and which method results in the greatest deduction.
If you choose to use the standard mileage rate, it includes the following vehicle expenses:
1. Fuel expenses
2. Vehicle maintenance & repairs
3. Registration fees
5. Depreciation or lease payments
The vehicle expenses the standard mileage rate does not include, and therefore, are deducted separately are:
1. Business parking fees & tolls
2. Interest on vehicle loan (business portion)
For more information on the business use of your vehicle deduction refer to IRS Topic Number 510.
If you are interested in finding out which method would provide you with the greatest deduction at tax time, QuickBooks Self-Employed helps you track your business expenses and mileage, AND calculates your vehicle business expense deduction using the standard mileage rate. This makes it easier for comparison at tax time. For more information on how you can leverage our services and QuickBooks Self-Employed to organize your business records in preparation for tax time, contact us today!
Disclaimer: I am not an attorney or CPA (yet) and this information is meant as a general guide. It is not intended to be used as legal or tax advice.