07 Oct How To Best Deduct The Business Use Of Your Vehicle in 2019
You will want to weigh out whether it is beneficial to deduct your business vehicles using the actual costs (fuel, depreciation, insurance, repairs/maintenance, oil, etc.) or the mileage rate. You can’t take both at the same time. For most service-based small businesses (sales, realtors, professionals, etc.) it is typically easier and in the long-term better to use the mileage method. However, for many in the service contracting business (a/c repair, plumbing, electrical, etc.) the actual expenses may make more sense.
Generally, if you start the actual expense method, you can’t switch to the mileage method for that vehicle.
Also, if you are incorporated, or own a separate business entity, you will likely want to set up a proper mileage reimbursement plan for each employee or employee/officer.
The Internal Revenue Service (IRS) released Notice 2019-02 providing the 2019 standard mileage rates. Beginning January 1, 2019, the standard mileage rates for the use of a car (vans, pickups or panel trucks) will be:
- 58 cents per mile for business miles driven, up from 54.5 cents for 2018
- 20 cents per mile driven for medical purposes, up from 18 cents for 2018
- 14 cents per mile driven in service of charitable organizations, unchanged from 2018
Notice 2019-02 contains the standard mileage rates, the amount taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) plan.
As always, an accurate mileage log for each vehicle is required. This is usually the case whether taking deducting actual expenses or taking the mileage method approach as you need to be able to prove to the IRS that your vehicle was for business use if you deducted it as such.
You will want to speak to one of our tax accountants to determine the best method for your business in order to deduct the most in your business from your vehicle use. As always, before deducting any expenses, it is best to contact one of our tax accountants to make sure you are on the right track. Your specific circumstances may be different than others. We are here to advise you as our valued client!