Standard Mileage Rate Misconceptions

Описание: I wanted to review the standard mileage rate with you. The standard mileage rate for 2020 is 57.5 cents and a tax payer uses that rate to deduct their vehicle expenses in leu of actual expenses so the tax payer has some options.

They can buy a business vehicle for instance or a vehicle to use partly for business and they can depreciate that vehicle, meaning they can just write off directly part of the cost of the vehicle and along with that they can write off interest they pay on the vehicle and they can write off fuel that they buy and expenses they expend on repairs and maintenance and all the other costs of operating a vehicle. They can do that, that’s the actual expense method, or they can use the standard mileage rate which certainly is sometimes easier than the actual expenses. So 57.5 cents a mile, that’s what it is.

Just a couple things to be aware of, there’s a lot of misconception. Most of my clients that come through my door who have a c-corporation, s-corporation, a partnership, they assume that they can use the standard mileage rate for the vehicles that those businesses hold and they’re used in those businesses and that is not true. Vehicles that are held in those types of businesses, the only way to write off those vehicles or use of those vehicles is by using the actual expense method. The standard mileage rate is reserved for sole proprietors, so people filing a schedule C on their individual tax income tax return as well as it’s used to deduct expenses for like medical travel or charitable travel, things like that. Charitable travel has a lower standard mileage rate. It’s not 57.5 cents. If you have a business or you’re incorporated or whatever, you will need to use the actual expense method. However, let me put a caveat on there. If you have a business and you want to write off the use of vehicles in that business, even though you cannot take the standard mileage rate, you still must track the miles used in your business vehicles. You still have to keep a contemporaneous log. You still have to every year report to the IRS that you drove say 10,000 miles for business and if there’s personal miles in there you have to report that as well. You still have to keep track of miles. That’s also a misconception; you still have to track miles no matter if you take the standard mileage rate or the actual expenses on vehicles, track miles. That’s the tip. If you want to talk about it, you need some clarification, you need some help with your business tax returns or personal tax returns, or especially if you think you paid too much tax and you want to actually do some planning and get those tax rates reduced, come talk to me. There’s a lot to talk about right now. We’re in a very active tax environment from a regulatory standpoint, from a legislative standpoint and there’s a lot happening especially if you look out 10 years. So come talk to me, we can reduce your tax liabilities, we can get you on a more efficient tax track for the future. We can do a lot here to help you out.