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Should I use the Standard Mileage Rate or Actual Vehicle Costs to calculate vehicle expenses?

This page has been updated for 2018 taxes and may not apply to previous years.

 

If you use your vehicle for work purposes, you may be able to deduct vehicle expenses on your tax return. You can use either the standard mileage rate or you can deduct your actual expenses.

Go to this section in Credit Karma Tax: Vehicle Expenses

 

Standard Mileage Rate

The IRS sets a standard mileage rate for the cost of operating your vehicle, which you would multiply by the total business miles driven during the tax period.

  • In order to use the standard mileage rate, you must choose the method in the first year your vehicle is used for business.
    • In future tax periods, you can choose to switch to actual expenses.
    • For a car you lease, you must use the standard mileage rate method for the entire lease period (including renewals) if you choose the standard mileage rate.

The 2018 standard mileage rates are:

  • Business 54.5 cents
  • Charitable 14 cents
  • Medical 18 cents
  • Moving 18 cents (active-duty members of the military)

To use the standard mileage rate, you must own or lease the car.

In certain situations, you cannot use the standard mileage method if:

  • you operate a fleet of five or more vehicles that are used at the same time,
  • you used a depreciation method other than straight-line,
  • you took a Section 179 deduction or special depreciation allowance on the car,
  • you have claimed actual expenses after 1997 for a car you lease, and
  • you are a rural mail carrier and receive qualified reimbursements.

Actual Expenses

These deductible expenses include the following:

  • Depreciation or lease payments
  • Repairs and Tires
  • Gas and Oil
  • Licenses and Registration Fees
  • Insurance

You must only deduct the actual expenses related to the business use of the vehicle. If you used your vehicle for 50% business and 50% personal use, then you would deduct 50% of the actual vehicle expenses.

Other vehicle related expenses like parking or tolls may be deductible whether you use the standard mileage rate or actual expenses.

If you have the option to choose either method, you should calculate both methods and select the one with the greatest benefit.
Source: irs.gov

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