Businesses generally can deduct the entire cost of operating a vehicle for business purposes. Alternatively, they can use the business standard mileage rate, subject to some exceptions. The deduction is calculated by multiplying the standard mileage rate by the number of business miles traveled. Self-employed individuals also may use the standard rate, as can employees whose employers do not reimburse, or only partially reimburse, them for business miles driven.
Many taxpayers use the business standard mileage rate to help simplify their record keeping. Using the business standard mileage rate takes the place of deducting almost all of the costs of your vehicle. The business standard mileage rate takes into account costs such as maintenance and repairs, gas and oil, depreciation, insurance, and license and registration fees.
Beginning on January 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) is:
- 58 cents per mile for business miles driven, up from 54.5 cents for 2018
- 20 cents per mile driven for medical or moving purposes, up from 18 cents for 2018
- 14 cents per mile driven in service of charitable organizations, no change from 2018
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.
Taxpayers may have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. If instead of using the standard mileage rate you use the actual expense method to calculate your vehicle deduction for business miles driven, you must maintain very careful records. You must keep track of the actual costs during the year to calculate your deductible vehicle expenses. One of the most important tools is a mileage log book.
Our office can help you compare the benefits of using the business standard mileage rate or the actual expense method. Give us a call today.