View Full Version : Tax help....Mileage or Actual Vehicle Costs?

11-23-2010, 10:12 PM
The last few years that my accountant has done my taxes for my business, I've had them use mileage for my vehicle expense deduction as opposed to keeping all gas/maintenance receipts and deducting those. The deduction usually comes out to anywhere between 10-15k. I purchased a new vehicle this year and talked to my accountant about how the deduction would work with the new "section 179" or whatever it is called this year where they allow you to deduct 100% of new equipment purchases the first year. They told me that by using the mileage deduction I can't use the purchase price as a deduction because that is a "vehicle expense" and is covered in the mileage deduction. Does anyone have any experience or advice with this? It seems to me the vehicle purchase price would be completely seperate from any yearly operating/maintenance costs. Any input is greatly appreciated!

11-23-2010, 10:32 PM
not being a wise guy, but if you think we are going to give you better advice than your accountant, its time for a new accountant.

11-23-2010, 11:08 PM
Haha, that is a good point. This was his assistant that I spoke with because he is out of town. She usually knows what shes talking about but this seemed a little off. I'm going to see him Monday when he is back in town but in the mean time I figured I'd see what you all thought.

Darryl G
11-23-2010, 11:47 PM
I do actual vehicle cost but my truck is used solely for business. Got other stuff to drive for personal use.

11-24-2010, 02:40 PM
Your accountant is completely right. White a vehicle you can do one of two things. You can write off the purchase price and all maintenance costs/and fuel costs OR you can write off the mileage. You can not do both. Furthermore once you start one or the other with a particular vehicle, you can't ever change. So you can't write off the purchase price and then write off mileage. Another thing is if the vehicle is being used as a personal vehicle then you can not legally write off the actual costs and you have to do mileage because not all the miles are for the business.

Which is more beneficial to you is dependent on the cost of the vehicle and how long you plan to keep it. Lets say the vehicle costs $30,000 and gets 15 mpg. Lets also assume that you'll drive it for 150,000 miles at 15,000 miles per year.

Lets look at it both ways:

Actual Costs:
$30,000 purchase Price
$30,000 fuel (15 mpg/150,000)*$3 per gallon
$10,000 maintenance costs (oil changes and repairs over the 150,000 miles)

So you would write off a total of $70,000

Now Mileage:
150,000 miles multiplied by the 50 cents per mile that the IRS allows and you come out with a total of:

So if you were to drive it 150,000 miles it is about equal... But lets say you were only going to drive it 5 years and 75,000 miles:

Actual Costs:
$30,000 purchase Price
$15,000 fuel (15 mpg/75,000)*$3 per gallon
$4,000 maintenance costs (oil changes and repairs over the 75,000 miles)

So you would write off a total of $49,000

Now Mileage:
75,000 miles multiplied by the 50 cents per mile that the IRS allows and you come out with a total of:

So if that's the case, you're much better taking the Actual Costs instead of mileage. There are other variables that play into your decision as well. Such as how much in deductions you need right now. If you go with mileage you will only be able to take $7500 each year and no more, if you go with actual costs you can take the full 30,000 this year. This also doesn't take into consideration that if you take actual costs, you have to consider the money you make when you sell the vehicle as income. But if you take mileage you do not.

Another mistake people often make is if you are taking the mileage, you CAN NOT write off the vehicle fuel expenses, or any other related vehicle expenses.

Hope this helps

11-24-2010, 03:18 PM
Thank you for the in depth response, that is exactly what I was looking for. I will have to do some calculating to figure which option will be best for my next vehicle. Mileage has been working out so far.
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11-24-2010, 03:35 PM
Mileage works great for used trucks because the purchase price is so low. I personally have actual costs for my work only truck and mileage for my personal/work truck. I would probably be better off financially if I were to take the mileage for the work only truck because I paid very little for it. But doing actual keeps my accounting straight and allows me to see exactly what I'm spending on vehicle expenses. So it works for me.