Actual or Standard Mileage Rate: That is the question!
If you drive a personal vehicle for business, you have two options for deducting your vehicle expenses. You can use the standard mileage rate or you can use the actual expense method.
Which is better? As with most things when it comes to taxes … it depends. Let’s dive into using the standard mileage rate vs actual vehicle expenses.
Standard Mileage Rate
With the standard mileage rate, you take a mileage deduction for a specified number of cents for every business mile you drive. The IRS sets the standard mileage rate each year (the IRS 2017 standard mileage rates are listed at the bottom). To figure your deduction, multiply your business miles by the applicable standard mileage rate.
The standard mileage rate requires you to keep track of how many miles you drive for business and the total miles you drive. You also need the date of the trip, your business destination and business purpose in a mileage log.
If you choose this method, you cannot deduct actual vehicle operating expenses. That means you can’t deduct maintenance and repairs, gasoline and its taxes, oil, insurance, and vehicle registration fees. The standard mileage rate includes all these items, as well as depreciation.
If you use this method the first year you place the vehicle in service for your business, you will have the option in future years of using this method or the actual expense method. If you lease your vehicle and use this method the first year, you are required to use this method for the entire lease period. Also, you cannot use this method if you operate a fleet of vehicles in your business (more than 4 vehicles used simultaneously).
Actual Expense Method
Instead of using the standard mileage rate, you can deduct the actual cost of using your vehicle for business, plus depreciation. This requires much more record keeping, but it can result in a larger deduction. If you use this method, you must keep careful track of all the costs you incur for your car during the year, including:
- gas and oil
- repairs and maintenance
- depreciation of your original vehicle and improvements
- car repair tools
- license fees
- parking fees for business trips
- registration fees
- tires
- insurance
- car washing
- lease payments
- towing charges, and
- auto club dues.
2017 IRS Standard Mileage Rates
- 53.5 cents per mile for business miles driven
- 17 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
