On my vehicle expenses for my vehicle, I'm being asked if I took the STANDARD MILEAGE method last year and am assuming the alternative is ACTUAL method. How can I determine which I took? Further, are you able to freely switch between both methods?
In order to determine this, you'll need to refer to your prior year return.
You are not able to switch freely between methods. If you want to use the standard mileage rate method in any year, you have to do that the first tax year you use your car for business. Then, you can freely switch back and forth. However, if you use the actual expense method in the first year, you need to always use the actual method for the vehicle in all future years.
For more information, see Standard Mileage Rate vs. Actual Auto Expenses
Where do I find on my previous return the option I took last year?
When you are reviewing last year's tax return, go to the vehicle section to see if you used the standard mileage rate. The business miles times the mileage rate for a business vehicle, in 2023, was 65.5 cents per mile. You must look at the vehicle worksheet itself because there may be other expenses included on your Schedule C for Car and Truck expense line.
For the first year it was used for business, look at Form 4562. Your vehicle should be listed in line 26 or 27. If there is depreciation in column (h), Section 179 in column (i) or if Line 25 shows the Special Depreciation Allowance for the vehicle, you used Actual Expenses in that first year.
If it doesn't show those amounts (but it shows your vehicles), you used the Standard Mileage Rate.