Standard Mileage Rate v Actual Expenses for Business Expenses
To write off the cost of driving for work, you can apply the IRS per-mile write-off to the number of miles you put in or deduct part of your actual driving expenses. That would cover not only gas but also a percentage of maintenance, repairs and new tires - the whole enchilada. It takes more record keeping, but it might give you a greater deduction.
Do You Have a Choice?
The IRS usually gives you the option to choose whichever method works best for you. In some cases, the rules won't let you take the per-mile deduction. For example, you have to use actual expenses if your business uses five or more cars at the same time. The way you write off or depreciate the cost of the car may also require you use actual expenses.
What's Legally Deductible?
Using the actual-expense method, you can write off a share of everything you spend on your car. That's more than the obvious ones, such as gas, repairs and maintenance. It also includes insurance, interest on your auto loan, property taxes and vehicle registration. Additionally, you can claim parking fees and tolls related to work. The per-mile rate excludes your expenses, except for parking and tolls.
Keeping Mileage Records
If you opt for the mileage write-off, just track the number of miles you drive for business and the reason for the trips. If your schedule is a regular one - same route every week or month - you only have to record enough mileage to establish a pattern.
For actual expenses, you have to keep records of your automotive expenses as well as your work mileage and your non-work mileage. For instance, if you drive the car 40 percent for work, you can claim 40 percent of your expenses as a deduction. Just record the odometer reading at the start and end of the year, then divide the total miles you drove into your work mileage. .
Which Works Better?
If you drive more for business than for personal reasons, it's a good idea to charge ALL your auto-related expenses, including gas, maintenance, insurance, parking, etc., through your business account. This way, at the end of the year, your accountant can evaluate which deduction is more valuable for you - the standard mileage deduction or the actual expense deduction.