How to Deduct Auto Expenses
Let’s discuss how business owners can use vehicle expenses as a tax deduction!
There are two methods to deduct your vehicle expenses:
Standard Mileage Rate
Actual Expenses
Standard Mileage Rate
The standard mileage rate is typically the easier of the two options. Throughout the year, you will track all trips in your vehicle. I suggest an app, such as MileIQ to assist in tracking your mileage.
You will need to document to following details for every business trip:
Date
Business Purpose
Start and ending location
Total Mileage
At the end of the year, you will multiple your business mileage by the annual IRS rate. The IRS business mileage rate in 2022 is 58.5 cents per mile.
If you don’t like being tracked by apps on your phone or are on a budget, you can download my free mileage tracker here!
Actual Expenses
The actual expense method requires a bit more accounting your end. You will determine the actual costs to operate your vehicle and multiply it by the percentage business use. How do you know the business percentage use? By tracking your mileage just as you would with the standard mileage option!
The actual costs to track include: gas, oil, repairs, tires, insurance, registration fees, licenses, lease payments and *depreciation*. Your CPA can help you determine the amount to depreciate your vehicle in a given year.
I recommend speaking with your CPA to determine if the standard mileage rate or actual expense method would be more beneficial to you!
Source: IRS Publication 463