The standard mileage method and actual expense method are two main methods to make a deduction on your miles driven for business purposes. Both methods have their own benefits and can be preferred depending on how you drive your miles. You simply multiply your total business miles by standard mileage rate of the current year. If you want to make a deduction by using the actual expense method, you will need to find the percentage of your total business miles.
For example, if you had 1.000 miles and 200 of it were for business, this means that your actual expense percentage is 20%. In summary, 20% of your miles were for business purposes.
You can make a deduction on your every mile driven for business purposes. Every business-related trip beginning from your office allows you to make a deduction on these miles. Your trips from home to business-related appointments and conferences are also counted as business miles. However, you can’t deduct your miles from home to your regular office.
Standard Mileage Deduction Pros and Cons
The standard mileage rate method requires you to keep track of your miles only. You do not have to keep any receipts for your vehicle expenses. It’s very simple and handy for those who do not want to deal with so many paperwork and receipts. You can switch back to the actual expense method if you feel that the standard mileage rate method is not beneficial to you anymore. Standard mileage deductions may not be as high as what you would have deducted by using the actual expense method.
Actual Expense Method Pros and Cons
It’s always best to use the actual expense method if you have an expensive car. An expensive car means higher vehicle expenses a year. If you do not drive many miles for business purposes, you will probably deduct more with the actual expense method. You can’t switch it back to the standard mileage method once you’ve chosen the actual expense method.