Switching Car Expense Methods to get the Biggest Tax Deduction

January 22, 2021
Frederick W. Daily, J.D, LL. M (tax)
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Keanu Kane has driven his Chrysler 300 for his professional bodyguard and cat-sitting operation for the past three years. Come tax time for 2015, Keanu naturally wants to go with the method of deducting his car expenses will give the largest tax savings—either the Actual Expense method or the Standard Mileage Method. Of course, Keanu has wisely been using the MileCatcher app, and so he knows exactly the number of business miles he has driven while guarding bodies and sitting cats.

So, the question is, can Keanu switch tax deduction methods for 2015?

To find out the answer, we have to look at how Keanu has deducted his vehicle expenses in the previous year that he has owned the Chrysler.

  • No switching is allowed if Keanu used the actual expense method for the Chrysler in 2014. Keanu can’t use the standard mileage rate for the same vehicle.
  • However, Keanu may switch from the standard mileage method if he used it in 2014, to the actual expense method in 2015 This would make sense if Keanu drove a little for biz in 2014 and a lot in 2015. But, a switch back in 2016 to the standard mileage rate would not be permitted.

Note: When Keanu gets a new car, he can start all over again in choosing between the two methods of deducting his car expenses. Whatever method he used in a previous years isn’t binding on his choice.

For more info on deducting vehicle and other business expenses visit my website, taxattorneydaily.com

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Frederick W. Daily, J.D, LL. M (tax)
Originally Published
April 22, 2016