When you use your automobile for business, there are two methods for deducting the related expenses. The first, and most common for home business owners, is the “Standard Mileage Rate” method. The second is the “Actual Expense” method. You must choose one or the other method for tax purposes, but in most cases, you may use the one that generates the largest deduction.
Deductr is designed to track both methods and tell you which one is greater throughout the year.
Standard Mileage Rate Deduction
To take the Standard Mileage Rate deduction, all you need is the number of business miles driven and multiply that by the current mileage rate established by the IRS.
We make tracking your mileage easy. Deductr automatically does all the calculating for you. You can also deduct parking expenses and tolls, and even the interest portion of your auto payments, in addition to the standard mileage deduction.
In addition to business miles, you can track your medical miles, charitable miles and moving miles, all allowed by the IRS for personal deductions at their own rates. This can add up to significant tax savings for you over the course of a year.
What this method doesn't allow you to deduct are actual expenses incurred from normal use of your car, like gasoline, oil changes, and maintenance. This is because the standard mileage rate that you can apply to your business miles is meant to cover such expenses.
Actual Vehicle Expense Deduction
The alternative to the 'Standard Mileage Rate' method is the 'Actual Expense' method. To take the Actual Expense deduction, you need to track what you actually spend on gas and oil, repairs and maintenance, and insurance for your vehicle; you can even take a deduction for the depreciation of your vehicle. However, since an automobile is what the IRS calls "listed property," there are special rules for deducting the actual expenses associated with its use.
Since you are not allowed a deduction for the personal use of your vehicle, you can only deduct a PERCENTAGE of the actual expenses that relate to the business use of your vehicle. The way to calculate the business use of your vehicle for the Actual Expense deduction is to track your mileage and calculate a business use percentage based on miles driven. deductr performs this calculation for you.
Consult your tax professional to see if this fits your circumstances. This is not to be taken as tax advice. Please refer to our End User License Agreement.