Learn the rules for deducting your local business travel expenses using the standard mileage rate.
Some business people, like real estate agents and brokers, spend a good distribute of time behind the wheel of their car. indeed, it ‘s not rare for real estate of the realm agents to drive over 20,000 miles per class for business. fortunately, local department of transportation costs are deductible as business-operating expenses if they ‘re ordinary and necessary for your clientele. obviously, such expenses are ordinary and necessary for many business people who do their oeuvre away from their agency. It makes no remainder what type of fare you use to make the local trips—car, SUV, limousine, motorcycle, taxi—or whether the vehicle you use is owned or leased .
If you drive a car, SUV, or van for clientele, you have two options for deducting your vehicle expenses : You can use the standard mileage rate, or you can deduct your actual expenses for gas, depreciation, and other drive costs. Most people use the standard mileage rate because it ‘s dim-witted and requires less recordkeeping ; you only need to keep lead of how many business miles you drive, not the actual expenses for your car, such as the total you pay for accelerator .
Deducting Business Driving Expenses Using the Standard Mileage Rate Deduction
Under the standard mileage rate, you deduct a intend number of cents for every commercial enterprise nautical mile you drive. The IRS sets the standard mileage rate each class. For 2022, the standard mileage rate is 58.5 cents per sea mile, up from 56 cents per sea mile in 2021. Check the IRS web site for the stream class ‘s rate. To figure out your deduction, simply multiply your business miles by the applicable standard mileage pace.
Example. Ed drove his car 10,000 miles for his substantial estate of the realm business in 2021. To determine his cable car expense discount, he just multiplies his business mileage ( 10,000 ) by the applicable criterion mileage rate ( 56 cents ). He gets a $ 5,600 subtraction ( 10,000 x .56 = $ 5,600 ). If he drives the like sum in 2022, he ‘ll get a $ 5,850 deduction.
If you choose the standard mileage rate, you ca n’t deduct actual car operating expenses—for case, alimony and repairs, gasoline and its taxes, oil, insurance, and vehicle registration fees. All of these items are factored into the rate the IRS sets. And you ca n’t deduct the cost of the car through disparagement or section 179 expense because the car ‘s depreciation is besides factored into the standard mileage rate ( as are lease payments for a lease car ).
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What Expenses Can I Deduct?
The only expenses you can deduct ( because these costs are n’t included in the standard mileage pace ) are :
- interest on a car loan
- parking fees and tolls for business trips (but you can’t deduct parking ticket fines or the cost of parking your car at your place of work), and
- personal property tax that you paid when you bought the vehicle, based on its value—this is often included as part of your auto registration fee.
Using the Standard Mileage Rate In the First Year You Use a Car for Business
You must use the standard mileage pace in the beginning year you use a car for business or you ‘re forever foreclosed from using that method for that cable car. If you use the standard mileage rate the first class, you can switch to the actual expense method in a late year, and then switch back and forth between the two methods after that. For this reason, if you ‘re not indisputable which method you want to use, it ‘s a good theme to use the standard mileage rate the first year you use the car for business. This leaves all your options open for later years. But this rule does n’t apply to rent cars. If you lease your car, you must use the standard mileage rate for the entire lease period if you use it in the inaugural year .
Get More Information
For more information on this and other tax issues, refer to Deduct It !, by Stephen Fishman ( Nolo ) .