There are two basic ways to claim vehicle operating expenses.
Actual costs multiplied by the percentage that is business use is one way. Suppose you drove the vehicle 10,000 miles for the year and 2,000 miles were documented for business use. Twenty percent of the actual costs (gas, repairs, tires, insurance, license and depreciation) can be your deduction.
The other method is the standard mileage rate. Instead of the business use percentage of actual costs, you can choose the standard mileage rate. In the above example (2,000 business miles), in 2015 you could use the rate of $.575 per mile and claim $1,150 as vehicle expense.
The standard mileage rate can be used by businesses (of all types), self-employed individuals (sole owner businesses), or employees to compute the deductible costs of operating automobiles (or light trucks and vans) they own or lease for business purposes. If you drive on your employer’s business and can not get reimbursed, that can be a miscellaneous itemized deduction on your Schedule A of your form 1040 (individual income tax return). But it would be better to get reimbursed.
The business standard mileage rate can not be used to figure the deductible expenses if you have five or more vehicles used at the same time (during the year).
If you choose to use the mileage method in the first year of business use, that is considered to be an election to exclude the vehicle from MACRS depreciation (a regular depreciation method).
If you use a vehicle for business and elect the mileage method (claim the cents per mile), depreciation expense is considered to have been allowed at the rate of 24 cents per mile for 2015. That is important if you sell the vehicle, or trade it in on another vehicle. The cost (tax basis) of the vehicle is reduced by the depreciation to determine the adjusted tax basis for sale (but not below zero).
The business mileage rate for year 2016 is reduced to just $.54 per business mile.
If the vehicle is used for going to and from medical appointments, picking up prescriptions and other medical use travel, the 2015 mileage rate is $.23 per mile in 2015. Because of the reduction in the cost of gasoline, the 2016 rate for medical use is reduced to $.19 per mile. If the vehicle is used in moving, the rates are the same as for medical use.
There is even a different mileage rate for driving on church or charitable activities (as a volunteer).
For 2015 that rate is $.14 per mile and it is the same rate for 2016.
Did you hear? “The income tax has made more liars out of American people than golf has,” said Will Rogers.
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.