Why Depreciate Your Vehicle?

There is a popular misconception that you can take the Standard Mileage Rate and depreciate your vehicle when it is used for your employer's benefit. Let's clear up some of these misconceptions.

First, when you have mileage that can be claimed for the use of your personal vehicle for the benefit of your employer, you cannot claim this mileage if your employer has reimbursed your mileage.

Any mileage that you have that is not reimbursed can be claimed on your personal return on Form 2106 - Employee Business Expenses. Make sure that you have documentation, either a mileage log, etc.

Second, when claiming mileage, you have two choices of how you want to claim the deduction. Either the Standard Mileage Rate or Actual Expenses. The IRS requires you to make a determination of which you want to claim; and once you have made your choice....YOU HAVE TO STICK TO IT! You cannot change methods year after year. If the standard mileage rate gives you the best deduction one year and the next year you would get a better deduction if you used the actual, then you cannot flip flop. If you chose the standard the first year, you must continue to use it for every year thereafter.

Now many taxpayers want to take the standard mileage rate and depreciate their vehicles. That is not allowed since the IRS has factored in depreciation in it's yearly rate. You can only depreciate your vehicle if you chose to use the actual expense method.

From my experience, 95% of the time, taking the standard mileage rate always gives you the best deduction.

Besides, why would you want to depreciate your vehicle since you have to recapture all that depreciation when you sell it?

2008 Form 2106

Instructions for Form 2106

Standard Mileage Rates