The Lowdown on Auto Expenses—Can I Deduct My Car? (Part 2 of 2)

In Part 1 we looked at the difference between business use and personal use for a vehicle, and discussed how to track and deduct actual auto expenses versus tracking business-related miles. (Read Part 1 here.) In Part 2 we will explore the advantages of using the standard mileage rate over actual expenses for business, and describe standard mileage rates for allowable, non-business use.The beauty of the standard mileage rate is fourfold.

  1. You don’t need to track every receipt for every expense.
  2. You likely are already tracking your business versus personal miles (to find your business-use percent).
  3. You can always switch to actual expenses for a year in which you anticipate higher actual expenses. For example, use actual expenses in years you incur a lot of repair costs (you have this freedom only if you used the standard mileage rate for the first year the particular vehicle was placed in service).
  4. You can avoid the pesky depreciation recapture in the event you later sell the vehicle.Other Car Deductions

In case you’re curious, the standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil. So, you get to factor in all your actual expenses without the hassle of tracking each one. As a reminder, the standard mileage rate for 2015 is $0.575 (up from 56 cents in 2014).

There are other types of mileage (non-business) that are deductible on your tax return. Without getting bogged down in the details, the rates are:

  • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014.
  • 14 cents per mile driven in service of charitable organizations.

The rate for medical and moving purposes is based on the above-calculated variable costs, such as gas and oil. The charitable rate is set by law.

Of course, all of the above is a general characterization of vehicle-related deductions, which should give you a good idea of which method is better suited to your circumstances. But we all know how nuanced the IRS can be! So, connect with us so we can give you nuanced insight on your particular circumstances in order to help you make the best, most informed business decisions. Remember that at Thrive Business Group it’s

Your Life. Your Business. In That Order.