If you drive for Uber, Doordash, Instacart or any other company where you use your vehicle for employment, this article is for you!
The IRS has two different ways of calculating the cost of using your car for your business. Because of this, you’ll want to see what both options are so you can choose the best option that will benefit your pocketbook the most!
Option #1: Standard Mileage
Option #2: Actual Expense Method
Standard Mileage Method – This method is definitely more basic than the Actual Expense Method, but may not be the best business mileage deduction in the long run. In order to calculate the deduction for mileage you must track all of your miles driven for business daily, then add up to the annual number of miles. Then, you would use that business mileage and multiply it by the standard rate to get your Standard Mileage Deduction. The standard rate for 2020 is $.575.
Example of standard mileage calculation: 6,000 business miles X $.575 (2020’s standard mileage rate) = $3,450 standard mileage deduction
Actual Expense Method – For the Actual Expense Method, you are adding up all of the expenses from your vehicle and then, similar to the Standard Mileage Method, take the expenses and calculate how much can be categorized as business use. Things include: lease payments, maintenance, tires, oil, insurance, gas, licensing/titles/registration fees and depreciation. If you use about 75% of your gas for your business, you would multiply the amount you’ve spent on gas in the past year by 75% to find the business expense.
Example of gasoline expenses: $5,466 total spent X .75 (75%) business use = $4,099.50 business expense.
CarAdvise is here to help. Did you know that when you use CarAdvise, ALL of your maintenance expenses are tracked in one place, in our system? We make tax time a breeze to calculate by helping you manage your expense all in one easy location.