Do you use a vehicle for your business? If you use your vehicle solely for business purposes, then you can deduct its entire cost of operation. If you drive for Amazon Flex, Uber, Lyft (or your job/business in general) you need to know about these upcoming changes.
WASHINGTON ― The Internal Revenue Service today issued the 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
- 18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
- 14 cents per mile driven in service of charitable organizations.
The business mileage rate and the medical and moving expense rates each increased 1 cent per mile from the rates for 2017. The charitable rate is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other requirements are described in Rev. Proc. 2010-51.
Notice 2018-03, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.
Want to know if you should buy or lease your new business vehicle?
As with most decisions in life, taxes should only be one of the considerations. Here are a few of the non-tax considerations on buying or leasing a business vehicle:
- Number of miles your drive each year: leased cars often charged extra fees for miles driven over 10,000 or 12,000/year.
- How long you keep a car: do you get a new car every 3-4 years or keep it until its junk?
- How much do you want to spend on your monthly payments: lease payments are usually quite a bit less than monthly payments on car loan.