Tax Tips

Tax Tips: Business Use of Vehicle

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Actual Costs Versus Standard Mileage deduction

If you use your car only for business purposes, you may deduct its entire cost of operation (subject to limits discussed later). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use. The mileage tracker becomes important regardless of which method you use. There are a few out there that do well and keep track pretty accurately. Some to choose from are Everlance, Stride, Triplog, Hurdlr, Mileiq — use one that works well for you. One thing to consider is that the IRS will require a mileage log if you are ever audited.

So, let’s go over what each method entails.


Standard Mileage

Is what is stated: tracking of your business mileage and multiplying it by the IRS standard rate, which is 58 cents per mile. Standard mileage includes your depreciation, gas costs, maintenance, repairs, insurance — anything that is used to operate your vehicle. When using standard mileage you can also deduct the interest paid on your vehicle if you have a car payment, dependent on the percentage used for business. If you have a fleet of 5 or more cars, you cannot use standard mileage rate. Parking or toll roads can also be deducted if using standard mileage.


Actual Cost

As this states, it is the actual costs of operating your vehicle for business. Actual car expenses include Depreciation Licenses, Lease payments, Registration fees, Gas, Insurance, Repairs, Oil, Garage rent, Tires, Tolls, Parking fees. There are other deductions that can be taken using actual cost and depreciation, such as 179 deductions. Usually I recommend that if you drive 90% or more for business use, then look at the actual cost versus standard mileage to see which one will pan out best.


Tracking miles

If you drive to a location to take your first order, that is considered “commuting miles.” See the chart below to determine when to track miles. The main job in the gig work case is your first job or batch taken.

 

Hope this helps. Remember we are always here to answer your questions or help you file your taxes.