The best deduction for you depends on many factors. Each method has its advantages and disadvantages, and they often produce vastly different results. Actual Expenses might produce a larger tax deduction one year, and the Standard Mileage might produce a larger deduction the next.
If you want to use the standard mileage rate method, you must do so in the first year you use your car for business. In later years you can choose to switch back and forth between the methods from year to year without penalty. Each year, you’ll want to calculate your expenses both ways and then choose the method that yields the larger deduction and greater tax benefit to you.
Below you’ll find an easy-to-follow road map to choosing the best method for you, this year.
Standard Mileage vs. Actual Expenses: Getting the Biggest Tax Deduction
The method you use to calculate the business use of your car can have a big impact on your total business expenses, your net income, and your tax burden. Keep complete records so you can calculate your deduction using both methods, and then choose the one that saves the most money for you. Both calculations use your mileage numbers, so keep detailed track of your business miles, especially if you use the vehicle for personal use also.
Remember, with TurboTax, we’ll ask you simple questions and fill out all the right forms for you to maximize your tax deductions.