This includes keeping detailed records of all vehicle-related expenses such as gas, oil, repairs, insurance, registration fees, and depreciation. With the actual expense method, you can deduct the business-use percentage of these expenses.
One advantage of the actual expense method is that if you have a high business-use percentage for your vehicle, you may be able to deduct more than you would using the standard mileage rate. However, this method requires meticulous record-keeping and can be more time-consuming.
It’s important to note that if you choose the actual expense method in the first year, you are generally locked into that method for the entire life of the vehicle. The only exception is if you used straight-line depreciation. This means that if you switch to the standard mileage rate in the first year, you have the flexibility to switch between methods in future years.
Ultimately, the decision between the standard mileage rate and the actual expense method will depend on your individual circumstances. If you drive a lot of business miles and want a simpler method, the standard mileage rate may be the way to go. However, if you have a high business-use percentage and want to maximize your deductions, the actual expense method could be more advantageous.
Before making a decision, it’s a good idea to consult with a tax professional to determine which method is best for your specific situation. They can help you calculate potential deductions and ensure that you are maximizing your tax savings while staying compliant with IRS regulations.
The standard mileage rate for 2025 is 70 cents per mile. This rate takes into account the cost of gas, maintenance, insurance, and depreciation of the vehicle. To calculate your deduction using the standard mileage rate, multiply the total business miles by the standard rate.
For example, if you drove 10,000 business miles in 2025, your deduction would be $7,000 (10,000 miles x $0.70).
Overall, the standard mileage rate is a simple and easy way to calculate your deduction if you use your vehicle primarily for business purposes.