As discussed in Part 1, expenses from operating a vehicle can only be deducted for business, medical, charity, and relocation purposes. Part 2 will cover the differences between deducting actual expenses and claiming the standard mileage rates for tax deductions.
You can use the actual expenses involved in operating a vehicle for tax deductions. These costs can be for vehicle loan interest, depreciation, fuel, tolls, rentals, repairs, maintenance, insurance, parking, registration, leases, and tires. Depending on the drive’s purpose, these costs may be tax deductible. If the driving was for medical or charitable purposes, expenses related to repairs, insurance, interest or depreciation cannot be deducted.
Since driving costs from either commuting or personal purposes are not tax deductible, calculate the percentage of the total miles that were driven for tax-deductible purposes. To illustrate, if your total mileage was 20,000 with 15,000 of the miles driven for business purposes, a deduction of 75% can be claimed.
Claiming Standard Mileage
The alternative to deducting actual expenses is claiming the standard mileage rate to obtain a tax deduction. The IRS mileage rate will vary as determined by the purpose of the driving. Indexed for inflation, the mileage rate for a particular business purpose may change from year to year.
In order to determine the deduction for a tax-deductible driving purpose, the number of miles driven for that specific business purpose should be multiplied by the relevant standard mileage rate. Below are the standard mileage rates for 2017.
2017 Standard Mileage Rates
Business: 53.5 cents per mile
Charitable: 14 cents per mile
Medical: 17 cents per mile
Moving: 17 cents per mile
Tolls and parking are costs that can be deducted along with the standard mileage rate. However, other actual expenses may not be deducted.
How to Choose
It may seem obvious, but choose the option that results in the biggest deduction. The circumstances will be different for each taxpayer, and so the total will have to be calculated for each option to make a fair comparison. In any case, claiming mileage is simpler because the receipts for each expense won’t have to be itemized.
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