November 8, 2018 2:03 am

No Double Dipping for Vehicle Expenses

If you use your vehicle for business driving, you have a choice in how to handle your expenses. You can deduct your actual costs, including an allowance for depreciation (up to certain dollar limits) if you own the vehicle or your lease payments if you lease it. Or you can rely on an IRS-set mileage rate (54.5 cents per mile in 2018). This rate takes the place of deducting gas and oil, repairs, and depreciation/lease payments. In either case, you must meet substantiation requirements for your business trips (date, odometer reading, destination, purpose). If you use the actual expense method for the first year your vehicle was placed in service, you cannot switch to the IRS mileage rate. But if you use the IRS mileage rate for the first year your vehicle is placed in service, you can later switch to the actual expense method.

But you can’t use both methods simultaneously. In one recent case (Eldred, TC Summary Opinion 2018-49), a business owner who produced videos took both the standard mileage allowance and depreciation on his vehicle. When his Schedule C was examined, the error became obvious and the depreciation deduction was disallowed. He did substantiate his driving, but he should have chosen the write-off method that was better for his situation.

Tax Glossary

Appreciation in value

Increase in value of property due to market conditions. When you sell appreciated property, you pay tax on the appreciation since the date of purchase. When you donate appreciated property held long term, you may generally deduct the appreciated value.

More terms