You can choose between two methods for deducting business-related car expenses:
- Actual Expense
- Standard Mileage Allowance for 2023 is 65.5¢/mile.
The standard mileage rate for 2022 was 58.5¢/mi (Jan. – June) and 62.5¢/mi (July – Dec.).
You must make the decision in the first year you own the car (or place the car in service for business). If you choose the Actual Expense method in the first year, you cannot use the standard mileage expense in later years.
The Actual Expense method allows you to deduct all of your out-of-pocket costs for operating your car for business, plus an allowance for depreciation if you own your car.
Actual Expenses include:
The Standard Mileage Allowance also includes deductions for:
For tax purposes, if you operate as a sole proprietor or as a single member of an LLC, Car Expenses for the business are recorded on IRS Form 1040, Schedule C of the IRS tax forms and the mileage breakdown is recorded on IRS Form 2106.