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Your Auto Deduction: Actual or Standard Method? When you use your car for business, you have to choose a method for deducting the costs. There are two methods. 1. The actual cost method. This is where you detail out all the costs associated with the vehicle for the entire year. Interest, registration fees, insurance, fuel, taxes, maintenance: all deductible. 2. The standard method. This is a flat deduction per mile you drive. The fewer the miles you drive, the more attractive this method looks (especially considering the recordkeeping requirements). Don't forget that the mileage rate decreases once the vehicle is fully depreciated. A lot! You're often better off with the actual method when a car gets old. So which method should you choose? The short answer is: Both! Ok, at least TEST both to see which yields the greater deduction. Both require planning however. If you haven't kept track of where you went and what you spent during the year, either method will be subject to scrutiny. Get a head start. Keep a journal of your mileage. Save your receipts. When it comes time for the tax man to get busy, you'll be ready.

Contributed by Steven W Johnson on March 13, 2008, at 6:55 PM UTC.

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This intel was contributed by Steven W Johnson Steven W Johnson

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