To deduct business mileage using the standard mileage rate, multiply the actual business miles driven by the standard mileage rate published by the Internal Revenue Service (IRS) for the tax year the driving occurred. For the 2020 tax year, the standard mileage rate is 57.5 cents per mile. Note that you can only deduct business mileage, not personal mileage. When you take a deduction using actual expenses, you can use almost every expense associated with your business driving, including:
Interest on the vehicle loan Vehicle depreciation (leased vehicles cannot be depreciated) Registration fees and tax Parking fees and tolls Garage rent Lease payments (with some restrictions) Insurance on the vehicle Gasoline and oil Maintenance and repairs Insurance Tires License plates Registration fees
Total these expenses and multiply by the percentage of business use for the vehicle. Therefore, if 50% of the miles driven on the vehicle were for business use, you’d multiply your expenses by 50%. Be aware that there are several limitations on the use of the standard mileage rate. For example, you may not use the standard mileage rate to calculate your mileage deduction if you used the modified accelerated cost recovery system, also called MACRS accounting, or if you claimed a Section 179 deduction on the vehicle. You also can’t use the standard mileage deduction for more than four leased vehicles used at the same time. The way you record business mileage depends on which business tax return you use. Schedule C for small businesses, for example, includes questions about:
The date you started using the vehicle The total number of miles for business, commuting, and other use. Questions about whether the vehicle was available for personal use during non-business hours, was another vehicle available for personal use, and if you have evidence to support your deduction.
Having evidence to support your deduction is the most important part of taking the deduction. If you don’t have specific, detailed, at-the-time documents, the deductions may be disallowed in an IRS audit.
Mileage from a home-based business: If you work from home, miles you drive from home to business locations are deductible as a business expense. Mileage for a non-company car: You can deduct business miles driven in any car, as long as you keep good at-the-time records.
However, there are some things you can’t deduct. For example:
Mileage as advertising: If you drive a car with advertising on it, the expenses for driving the car are not considered as a business expense. (But the cost of putting the logo on the car is an advertising expense.)
There are some exceptions to this IRS rule: You can deduct expenses for traveling between workplaces and to a different, distant worksite. if you have a home business, some expenses for driving back and forth from your home business may be deductible, if your home business is your principal place of business. Of course, all of the driving must be business-related in order to be deductible on your business tax return. .
