Now you can deduct up to 55.5 cents a mile for business driving expense. You can use this rate for all kinds of vehicles including cars, vans, pick up and panel trucks. The rate increase was recently announced by the IRS for the year of 2012.
You can deduct the actual cost of vehicle operation by keeping track of expenses. However, Standard Mileage deduction can be used by those who do not keep track of the actual costs. The standard mileage rate is determined by authorities using the annual study of the fixed and variable cost of automobile operation.
In addition to the mileage rate, you can claim a separate deduction for expenses like parking fees or tolls. You can also deduct interest and state and local taxes relating to the purchase of the automobile.
Please note when the standard business mileage rate is used, automobile depreciation will be considered to have been allowed at a rate of 23 cents a mile. This depreciation will reduce your cost basis in the vehicle.
Where you cannot use the standard deduction?
For the most part, standard deductions are a great place to start if you do not document each expense. However, in some cases, the standard deduction is not your friend. For example, you cannot use standard mileage deduction for automobiles used for hire like taxicabs. You cannot use the standard deduction of the vehicle that was previously depreciated by other than the straight-line method.
We recommend you consult with your Tax Professional to ensure your deduction is calculated accurately.