Mileage Deductions Save You Money
Choosing the Standard Allowance
Trying to decide whether to itemize your car care deductions or take the standard mileage deduction for the use of your vehicle in the course of your job or business can be a major headache.
Making the decision to take the standard mileage deduction rather than itemizing your car care is generally based on laziness or poor record-keeping. The problem is that if you are going to itemize your car care deductions, you need to consider that in January of this year for the taxes you’ll be doing next year. People who travel a lot for business using their personal vehicle, and who are meticulous record keepers may actually save money by itemizing their car care deductions.
The primary key to figuring out which form of deduction is optimal for your car expenses is determining the per mile operating cost of your vehicle. Many newer cars will have a lower per mile operating cost than older cars do. However, you should be sure to consider the depreciation value of the vehicle when making this decision.
Another factor to consider is the size and gas mileage that the vehicle has. Smaller, more gas efficient vehicles are also likely to have a lower cost per mile than larger vehicles.
Computing Operating Costs of Your Car
To figure out your cost per mile, you will need to gather your gas receipts, car maintenance receipts, car insurance receipts, and an estimate of the depreciation for your vehicle for last year. You will also need a mileage log indicating the total miles driven during the tax year, and the miles driven specifically for business.
Once you have compiled all of this information, figuring out your cost per mile to operate your vehicle is quite simple. Add together the cost of your gas, car maintenance, don’t forget oil changes, car insurance, and depreciation. Take this total and divided by the number of miles driven last year. This will give you the cost per mile to operate your vehicle.
If this number is less than 50.5 cents, you are better off taking the standard mileage tax deduction. For the first half of 2008, the standard mileage deduction as determined by the Internal Revenue Service was 50.5 cents. For the second half of the year, it was 58.5 cents.
The IRS has announced that the rate for 2009 will be 55 cents. If the cost per mile to operate your car exceeds these numbers, then you need to develop a complete and accurate record-keeping system to keep track of all of the expenses related to operating your vehicle. Keeping receipts is imperative if you intend to take the itemize deduction rather than the standard mileage deduction. In general, operating brand-new cars and very old cars are the only time that it makes more sense to itemize rather than using the standard deduction.