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Here’s how small businesses can deduct vehicle costs from their taxes

Posted on July 18, 2019

If your business relies on the use of a vehicle(s), you may be able to deduct the expense of operating that vehicle on your business taxes. The process is pretty straightforward.

Here’s what to know, according to CPA Mike Poynter:

In general, businesses can use one of the two methods to figure their deductible vehicle expenses:

          Deducting the standard mileage rate from their taxes, or

          Tracking and deducting actual car expenses

Both are legal, and both require keeping precise, careful records.

For 2019, the standard mileage rates for calculating the deductible costs of operating an automobile for business:

          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

 Of course, businesses always have the option of calculating the actual costs of using their vehicle. Both options are legal, and both require keeping precise, careful records. So which method is preferable for your business? Here are the options to weigh:

   Businesses that want to use the standard mileage rate for a vehicle they own must choose to use the standard mileage rate in the first year they use the vehicle. Then, in later years, they can choose to use either the standard mileage rate or actual expenses.

   If a business wants to use the standard mileage rate for a leased vehicle, they must use this rate for the entire lease period.

   The business must make the choice to use the standard mileage rate by the due date of their return, and may not revoke the choice.

   A business that qualifies to use both methods may want to figure their deduction both ways to see which gives them a larger deduction.

If you want some help with determining the best way to manage your deducted vehicle costs, check out IRS.gov Publication 463, for a full list of actual expenses and how to calculate them. Or, call us for help.

Our CPAs can help you calculate your estimated costs at the half way point in the year, so you can make the best choice for your bottom line, come EOY.