Standard Mileage Rate Q & A

Standard Mileage Rate or Actual Expenses?

Standard Mileage Rate Question:car expense tax deduction

“I am doing a long term contract out of state 6 month. Car rental was to much, so I purchased a vehicle. Can I use the section 179 deduction how much of the vehicle purchase price can I deduct, and how much of my millage can I write off and are they different things. I pretty much drive the car to and from my apartment and work, to go eat or to the movies, or anything I would use my car at home for.”


Certified Tax Coach, Eric Levenhagen, CPA CTC

Deducting the cost of your car and deducting mileage are two different options you have when taking vehicle deductions. Since this is the first year you owned the vehicle, you can figure the deduction both ways and see which one produces the better result.

Standard Mileage Rate Option

For the standard mileage rate deduction in 2011, the rate changed after June (increased from $0.51 to $0.555 per mile) so make sure to separate miles driven from January-June and July-December. Since it sounds like you are in a temporary work location that you expect to last less than a year, I would be inclined to say the temporary work location rules apply to you. This means you can take the standard mileage rate from your apartment to your work location as deductible business miles. (without this rule, mileage between home and work would be nondeductible commuting miles). Any other personal miles not relate to work would not qualify for the standard mileage rate deduction – such as going out to eat or to the movies or any other personal errands.

Actual Expenses Option

For deducting actual expenses, you still need to add up all of your business miles so you can calculate the percentage of business use (BUP) that your car was used. For example, if you drove your car 10,000 miles during the year and 8,000 of those were business miles, then you can deduct 80% of all your actual car expenses. Unlike the standard mileage rate option, actual expenses include depreciation, gas, insurance, maintenance (oil changes & car washes, etc), repairs, and loan interest. The section 179 deduction can apply as long as your car’s BUP is over 50%, but it is pretty limited. If this is a small passenger vehicle, like a sedan, the maximum depreciation you can take in 2011 is $11,060.

These rules applying to the standard mileage rate vs actual expenses can be fairly complex and I have only generalized them here. If you read this and have more questions, I highly recommend consulting with a professional who knows these rules and can guide you through them so you don’t leave any money on the table!


**The answers provided to submitted questions are intended to serve solely as discussion on various tax topics, with the understanding that the publisher and the expert/author are not engaged in rendering legal, accounting, or other professional service and that they are not offering such advice in their responses. They do not constitute legal advice nor are they a substitute for legal counsel. All questions may not be answered.

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