Method 2. Standard Mileage Rate Deduction
This is a very simple method - IRS sets the per mile deduction rate ($0.575/mile for 2015), you track and apply your business mileages and multiply the two, that is your car related expense deduction amount.
The IRS per mile rate is meant to cover the following expenses, therefore you cannot separately deduct them:
- Depreciation (if you own car)
- Lease payments (if you lease car)
- Maintenance and repairs (oil, tires, car washes, etc.)
- Vehicle registration
When you cannot use the Standard Mileage Rate?
If you’ve used the Actual Costs Method for this car in a prior year (see our next discussion), you are not allowed to switch to the Standard Mileage Rate. There are a few other cases where you cannot use it:
- If you aren’t the owner or lessee of the car
- If you use five or more cars at the same time
- If you have claimed a Section 179 deduction (see our previous blog post)
The Bottom Line
If you drive not a luxury car for your business and want something simple to track, this is the method to use! If, however, you have a very expensive car or have unusually high expenses when operate your car, use the next method.