Business owners can deduct vehicle expenses two ways: the standard mileage deduction, or the actual expense method. Both require tracking business miles. With actual expenses, you log all costs like gas and insurance, then deduct the percentage matching your business miles. If you drove 9,000 business miles out of 10,000 total, you can deduct 90% of actual expenses.
In this tip today, I wanted to go over deducting your automobile, your car, your vehicle, however you want to say it, your truck. First, let me help you understand that regardless of these methods I'm going to teach you, you are able to write off the business use of your vehicles. The IRS gives you 2 ways in which you can write off the use of it. They either give you what they call actual method or standard mileage deduction. Let me start with the standard mileage deduction because it's the simplest. You track miles, your business miles, and then the IRS every single year publishes a mileage rate. You take your business miles, multiply it by the IRS rate, the standard mileage deduction as they call it, and that gives you your tax deduction for the business use of your vehicle. Now, the actual method is a little bit more complicated, and let me first say, even though we're using what did you actually spend on your automobile, You still need a mileage log. If you are audited and you decided to write off your actual expenses on the vehicle instead of the miles, the IRS is still going to expect a mileage log, and if you don't have it, they're going to disallow all those deductions. So the actual method is literally you track the money you spend on the vehicle— gas, Oil changes, tires, licensing, insurance. If you're buying the car, the interest expense on your loan. You also are able to depreciate the value of your vehicle. And so what— the reason we need the mileage log is because you actually have to also— you— Compare the business miles to your total miles. Let's say I drove 9,000 business miles, I drove 10,000 total miles. That's 90% business use, so I would get to deduct 90% of the actual money I spent on the vehicle.
