If you use your car for your business, your CPA has probably told you to track your mileage. The reason is that there is two way to calculate the auto related costs for your car- actual expenses and standard mileage rate- and both rely on knowing the number of business miles you drove for the year. The great thing here is the IRS lets you chose the method that leads to a more significant deduction.
Actual Expenses
You can keep track of and deduct the costs for actual auto expenses. These expenses would include gas, oil, repairs, tires, insurance, registration fees, licenses, and lease payments. If you use your car for anything personal, your deduction is reduced. The way to calculate your business use is to track your business and total miles for the year. For example, if you drove 10,000 for business and 15,000 total, your business use percent would be 10,000 / 15,000 = 66.67%, and you would only be allowed to deduct 66.67% of all of your auto expenses.
Standard Mileage Rate
For 2014 the standard mileage rate for business is 56 cents per mile. To determine your auto expenses using the standard mileage rate, you multiply the rate times the number of business miles driven. For example, if you drove 10,000 miles for the year, your auto expense deduction would be 0.56 x 10,000 = $5,600.
Have trouble keeping track of your driving? There are apps you can use to make it easier. Check out Triplog that tracks your rides using GPS.
