CAR DEPRCIATION OR MILEAGE CHOICE

[PatVenture]

I have a new car that I purchased in October of 2019.  I usually deduct my mileage for business travel.  This year Turbo Tax suggests that I take the depreciation of the new vehicle for a high deduction.  If I take the depreciation of the car for 2020, can I change it back to mileage deduction for the next tax year(2021)?

[AmeliesUncle]

You purchased it in 2019.  Was that when it was first used for business (first "placed in service")?

Are  you preparing your 2019 or your 2020 tax return?

Did you claim the Standard Mileage Rate in 2019?

[ColeenD3]

If you placed it in service in 2019, it depends how you chose to deduct your expense.

Per IRS Tax Topic 510

If you want to use the standard mileage rate to calculate vehicle expenses, you must choose it in the first year you use the car for business. In later years you can choose to use the standard mileage rate or switch to actual expenses.

Once you use actual expenses for the vehicle (even if it's the first year you used it for business), you can switch to standard mileage rate. 

If you use the standard mileage rate, you must have records of business versus personal miles driven. If you use actual expenses, you must have records of all expenses and must allocate those between business and personal use.

[Edited 2/28/21|5:36PM EST]

[AmeliesUncle]

---

@ColeenD3 wrote:

Once you use actual expenses for the vehicle (even if it's the first year you used it for business), you can't switch to standard mileage rate. You must continue using actual expenses as long as you use that car for business.

---

That's not correct.  As long as you used the Standard Mileage Rate in the first year, you can flip-flop back and forth as much as you want (but entering the "prior depreciation" gets tricky).

[PatVenture]

The car was purchased on October 19th of 2019.  My old car 2007 Accord was using mileage for all those years. So only a few months of my 2019 tax return the car, I used mileage.  Did not have many miles in 2019 for two months.  I am assuming I used mileage rate.  I had a lot more miles in my 2019 return on my 2007 Accord.  Not so many miles in my 2020 due to covid and not traveling. I am working with Turbo Tax Deluxe for my 2020 tax return.   I have used Turbo Taxe Deluxe for the past 10 years.  This is the first time it popped up for me to take the depreciation instead of mileage.  Stated that I would fair better this 2020 return.   On my 2019 return, I had only 2097 miles on my 2020 Accord.  At the end of 2020, I placed only 6349 miles. I just want to know if I choose the depreciation, will I be able to change back to mileage in the next tax return year.  I know that if I take mileage, that I am not allowed to depreciate the car the following year.

[PatVenture]

The car was purchased on October 19th of 2019.  My old car 2007 Accord was using mileage for all those years. So only a few months of my 2019 tax return the car, I used mileage.  Did not have many miles in 2019 for two months.  I am assuming I used mileage rate.  I had a lot more miles in my 2019 return on my 2007 Accord.  Not so many miles in my 2020 due to covid and not traveling. I am working with Turbo Tax Deluxe for my 2020 tax return.   I have used Turbo Taxe Deluxe for the past 10 years.  This is the first time it popped up for me to take the depreciation instead of mileage.  Stated that I would fair better this 2020 return.   On my 2019 return, I had only 2097 miles on my 2020 Accord.  At the end of 2020, I placed only 6349 miles. I just want to know if I choose the depreciation, will I be able to change back to mileage in the next tax return year.  I know that if I take mileage, that I am not allowed to depreciate the car the following year.

[AmeliesUncle]

You need to find out/confirm if you used the Standard Mileage Rate in 2019 for this vehicle.

If you did, yes, you can use Actual Expenses this year.  But be sure to enter an amount for the "prior depreciation" based on the depreciation component of the Standard Mileage Rate.

Yes, if you used the Standard Mileage Rate in 2019 and use the Actual Expenses in 2020, you can switch back to the Standard Mileage Rate in the future.

[PatVenture]

I checked my 2019 Income Taxes, and I use the standard mileage rate between October 20th and January 31st, so I guess I will continue using this method.  I use my car more for personal use than business.  According to your answer, if I switched to actual costs, I would not be able to change back to standard mileage.  

[AmeliesUncle]

Re-read my answers.  I said TWICE that you CAN switch back to the Standard Mileage Rate after using the Actual Expenses (assuming you used the Standard Mileage Rate in the first year).