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Should I use the actual expenses incurred or the standard mileage rate?

January 11, 2013

What to consider when calculating the costs of using your vehicle.

In determining whether to use the actual expenses incurred or the standard mileage rates, consider the following:

  1. Are there adequate records to substantiate the deductions? - If you have messy records or are missing receipts and other substantiation for the actual expenses, it makes sense to use the standard mileage rates based upon your driving log. Keeping track of the miles is much easier than keeping all of the receipts. With the technology age, Apps like MileBug make it easier to keep a log and track expenses right on your Smartphone.
  2. Which deduction is larger? - In cases where the taxpayer’s vehicle is used 100% for business, the taxpayer’s actual expenses will probably be larger than the standard mileage rates. Where this is not the case, the standard mileage rate may yield a better result.
  3. Basis reductions for business use - If a taxpayer uses their automobile for business, a portion of the business standard mileage rate is treated as depreciation, and thus reduces the basis of the automobile by 23 cents per mile for 2012 (22 cents per mile for 2011). When the taxpayer sells or trades in their vehicle, this will cause a higher realized/recognized gain on the transaction.
  4. Reimbursement/Allowances - Mileage or travel reimbursement or allowances may reduce or eliminate the deduction.

Any member of the KLR Tax Services Group can help you with calculating your business travel expenses or any of your tax planning needs. Contact us at or call 888-KLR-8557.

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