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Level 2

Car usage - Rental Expense

I have been deducting gas mileage for rental expense for the past few years.  I just realized I may have to do depreciation for the car.  Do I need to go back to the last few years taxes and correct this?  or can I just start depreciating the car starting this year?  Thanks in advance.

4 Replies
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Employee Tax Expert

Car usage - Rental Expense

You can switch from claiming the standard mileage rate to claiming actual expenses, but you can't switch back.

 

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't switch to standard mileage rate. You must continue using actual expenses as long as you use that car for business.

 

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.

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Level 9

Car usage - Rental Expense

The Standard Mileage Rate has depreciation built-in to it.  So by using that, you have been claiming depreciation and your prior tax returns are probably correct.

 

You can't claim the Standard Mileage Rate AND depreciation (which is part of Actual Expenses).  You can only pick one or the other.

 

 

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Level 9

Car usage - Rental Expense


@RobertG 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 is not correct.  You CAN switch back and forth (assuming you used the Standard Mileage Rate in the first year).  But I would not recommend doing it with TurboTax because the program is NOT set up for that in SEVERAL ways.

 

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Level 15

Car usage - Rental Expense

When using the "per-mile" deduction, depreciation is built into that. It's important that you "KEEP TRACK" of your total miles for each year, because when you sell or trade the vehicle, you will need to recapture that depreciation.

Since the per-mile deduction changes every year, so does the portion that is depreciation. If you take a look at https://bradfordtaxinstitute.com/Free_Resources/IRS-Mileage-Rates.xml.aspx about halfway down the page is the "depreciation per-mile" going back to tax year 2003