Small businesses can benefit from deducting vehicle costs on their taxes. Businesses that use a car or other vehicle may be able to deduct the expense of operating that vehicle on their taxes.
Methods for Calculating Deductible Vehicle Expenses
Businesses generally can use one of the two methods to figure their deductible vehicle expenses:
- Standard Mileage Rate
- Actual Car Expenses
2019 Standard Mileage Rates
Here are the standard mileage rates for calculating the deductible costs of operating an automobile for business, charitable, medical, or moving purposes:
- 58 cents per mile driven for business use
- 20 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
Choosing Between Standard Mileage Rate and Actual Expenses
Of course, business taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Here are some important facts to help business owners understand the differences between the two methods of figuring their deductible vehicle expenses:
For Owned Vehicles
- Businesses that want to use the standard mileage rate for a car they own must choose to use the standard mileage rate in the first year they use the vehicle.
- In later years, they can choose to use either the standard mileage rate or actual expenses.
For Leased Vehicles
- 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.
Timing of Election
- The business must make the choice to use the standard mileage rate by the due date of their return, including extensions.
- They cannot revoke the choice once made.
Comparing Both Methods
- A business that qualifies to use both methods may want to figure their deduction both ways to see which gives them a larger deduction.
Examples of Actual Car Expenses That Can Be Deducted
- Licenses
- Gas
- Oil
- Tolls
- Insurance
- Repairs
- Depreciation – limitations and adjustments may apply