Standard Mileage Rate vs Actual Vehicle Expenses 2009, 2010

You may know that because the IRS provides a standard mileage rate for the deduction of vehicle expenses used in your business, you are allowed to choose between this rate and the actual expenses you incur in calculating this deduction.

Because the mileage rate includes nearly all of the expenses you incur it is typically much easier to apply. All you need are mileage logs and the current rate allowed by the IRS.

But it may not always provide the best deduction you can get. By the time you add up all of the expenses you are entitled to for actual expenses, it’s not unlikely they will exceed the standard rate amount you could take.

Actual expenses include depreciation, licenses, gas, oil, tolls, lease payments, insurance, garage rental, parking, registration fees, repairs, maintenance, tire costs, etc. Expenses for personal property taxes and parking are deductible even if you do take the standard mileage deduction.

As of October 2008, the current standard mileage rate is 58.5 cents per mile. Given that gas prices have recently been declining, the standard rate looks very attractive presently, but it is still a good idea to run both calculations to be sure you’re deducting as much as you can.

If you will ever use the standard mileage deduction, you are required to use it in the first year your vehicle is in service for business purposes. There are also situations for which the tax law prohibits a vehicle user from taking the standard mileage rate.

These include:

• If the owner uses five or more vehicles in a business;

• If a Section 179 deduction was taken on the purchase of the vehicle;
• If the vehicle is leased and the actual expenses have ever been used to calculate the deduction.

Making a careful and wise decision about how you calculate the deduction you take for vehicle usage can save you a lot of money on your taxes. Do the right thing for yourself.

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