The IRS announced recently that the standard mileage rate for 2014 is 56 cents per mile. This is down one-half cent from last year. Using the standard mileage rate makes it easy to deduct your business-related automobile expenses each year. Throughout the year, log the miles that you drive for business purposes. Then, multiply the total by the standard mileage rate. The resulting amount can be deducted from your net income when filing your taxes. Employees can also submit mileage expense reports to your company for reimbursement, which you can deduct as well. It’s important to note that the miles you drive commuting to and from work do not count.
If you choose to use the standard mileage rate to calculate your deduction, you cannot deduct any actual expenses related to the use of your vehicle. Actual expenses include vehicle depreciation, gas and repairs. So, if you are purchasing a new vehicle that you are planning to use heavily for business purposes, it’s important to consider whether the standard mileage rate or actual expenses will provide you with the best deduction. Typically, if a vehicle gets good gas mileage, it is better to calculate the deduction using the standard mileage rate. If you expect the vehicle to have high operating costs, deducting actual expenses will probably be more preferable. It’s also important to note that if you elect actual expenses in the first year that you own a vehicle, you cannot change your election to the standard mileage rate the next year. As always, it’s best to seek out the advice of a tax professional to determine which method is best for you.