Businesses that use a car or other vehicle may be able to deduct the expense of operating that vehicle on their taxes. Businesses generally can use one of the two methods to figure their deductible vehicle expenses—actual car expenses OR standard mileage rate.
For 2019, the standard mileage rate for calculating the deductible costs of operating an automobile is 58 cents per mile driven for business use.
Business taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rate. Some examples of actual car expenses that a business can deduct include licenses, gas, oil, tolls, insurance, repairs, and depreciation, but limitations and adjustments may apply.
Businesses that want to use the standard mileage rate for a car they own must choose to use it in the first year they use the vehicle. Making the decision to utilize the standard mileage rate in the first year is also considered an election to exclude the vehicle from depreciation for the time the vehicle is used in that particular business. Based on this fact, a business owner would most likely not want to switch from “standard” to “actual.”
If a business wants to use the standard mileage rate for a car they lease, they must use this rate for the entire lease period. The “moral of the story” is choose your vehicle expense deduction wisely.
Contact us to calculate your business’s tax deduction both ways to see which gives you a larger deduction.
Excerpt from IRS Tax Tip 2019-57, May 10, 2019
