Standard Mileage Deduction vs. Actual Business Driving Expenses

Business Mileage Calculation Methods Compared
Actual Cost vs Standard Mileage - Which is Better?. Colin Anderson/Getty Images

Standard Mileage Deductions and Actual Driving Expenses Explained

Business people who drive for business purposes may claim business driving expenses as legitimate business expenses. This includes business owners and employees who drive for business reasons. It also includes mileage for vehicles owned by a business or owned by an individual and driven for business purposes. 

Car/truck expenses for business travel may be deducted using either the IRS standard mileage rate or actual expenses.

Using the Actual Mileage Calculation Method

Under this method, you keep track of all allowable costs associated with business use of your car/truck. You will need to establish a percentage use of the vehicle for this method. For example, let's say you have determined that your actual costs for the year for use of your car/truck total $15,000. Multiply this by the percentage of usage for business; say, 50%. So, you can deduct $7,500 in actual costs for business use of your car. 

Actual car expenses include:

  • Depreciation
  • Licenses
  • Lease payments
  • Registration fees
  • Gas and Oil
  • Insurance
  • Repairs
  • Garage rent
  • Tires
  • Tolls
  • Parking fees

Using the Standard Mileage Calculation Method

To use the standard mileage method, find the standard mileage limit set by the IRS for that particular year, and multiply it by the number of business miles driven. For 2015, for example, if you drove 1,100 miles for business, the mileage rate is 57.5 cents, so you can deduct $632.50 in business mileage expense.

 

Which Mileage Calculation Method is Best?

The answer to this question depends on several variables, including the number of miles driven and whether you have both personal and business vehicles. The most important variable is the number of miles driven for business during the year.

If You Drive Less Than 50% for Business

You can use the standard deduction to keep things simple and easy.

Keep track of all your miles driven and multiply by the current IRS standard mileage rate for the year.

Your specific circumstances may vary, so check with your tax professional before you take the deduction.

If You Drive More Than 50% for Business

You may be able to increase your deduction by using actual expenses. You will need to keep track of all expenses with supporting documentation. 

Changing Methods

You cannot switch methods from year to year. If you did not use the standard deduction last year, you cannot use it this year.

IRS Restrictions on Using the Standard Mileage Rate:

The IRS does not allow the use of the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

Your individual circumstance may vary, so calculate your expenses both ways to see which brings you the larger deduction and check with your tax advisor before completing your business tax return.

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