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Sunday, September 11, 2016

Standard Mileage Rate Method for Business use of a Vehicle

 
Choosing the Standard Mileage Rate Method

For a vehicle you own, you must choose to use it in the FIRST YEAR the vehicle is available for use in your business.

For a leased auto, the standard mileage rate method must be use for the ENTIRE lease term.

You must make the choice to use the standard mileage rate method by the due date (including extensions) of your return.

You can elect to use the standard mileage rate method if you used a car for hire (unless the standard mileage rate method is otherwise not allowed).

If you use the standard mileage rate method, you cannot deduct your actual vehicle expenses for that year.

Standard Mileage Rate Method NOT Allowed

You cannot use the standard mileage rate method if you:

·Use 5 or more cars at the same time.

·Claimed a Section #179 deduction on the car.

·Claimed the Special Depreciation Allowance on the car.

Interest Expense on an Auto Loan

If you are an employee, you cannot deduct any interest paid on a car loan. This applies even if you use the car 100% for business as an employee.

If you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car.

Personal Property Taxes

If you itemize your deductions on Schedule A (Form 1040), you can deduct state and local personal property taxes on automobiles. You can take this deduction even if you use the standard mileage rate method or if you do not use your car for business.

If you are self-employed and use your car in your business, you can deduct the business portion of state and local personal property taxes on Schedule C (Form 1040). If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040).

Parking Fees and Road Tolls

You can deduct any business-related parking fees and tolls in addition to using the standard mileage rate.

Standard Mileage Rate Method Calculation

To figure your auto deduction under the standard mileage rate method, you must keep an accurate and complete record of your business use of your vehicle.

You deduction is calculated by multiplying the total number of business miles for the year by the IRS allowed rate per mile (which the IRS usually adjusts each year).

 

This article was written by  Donald M. Scherzi, CPA, CFP, LLC
Mike Lupo, SCORE Counselor

 

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