If your company operates a vehicle, such as a car, SUV or delivery truck for business purposes, you are eligible for certain tax considerations, including a deduction for the miles traveled. (Sorry, but vehicles used as equipment and vehicles for hire are not eligible.) The law allows you to choose between the standard mileage rate and your actual costs. Which option is best for you depends on a number of circumstances, but something to consider for next year’s filing is the increase in the standard mileage rate of 3.5 cents.

Choosing actual costs vs. the standard mileage rate

The actual expenses accrued by the business use of company vehicles includes:

• Gas
• Oil
• Tires
• Insurance
• Repairs
• Registration fees

You can also claim a depreciation allowance for the vehicle, but in many cases the write-offs are subject to limits that don’t apply to other types of business assets.

If you don’t want the hassle of keeping track of your actual vehicle-related expenses, you can simply keep detailed track of your use of the vehicle, including the date of each business trip, the mileage and the destination. The mileage rate approach works well for businesses that reimburse employees for business use of personal vehicles. Since the Tax Cuts and Jobs Act ends employee deductions for unreimbursed business expenses, such as business mileage, reimbursements will be important for attracting and retaining employees who are expected to drive their personal vehicle for business purposes. However, the rules for a reimbursement program are detailed. Failure to comply would make the reimbursements taxable for your employees.

As of January 1, 2019, the standard mileage rate increases 3.5 cents per mile from 54.5 cents to 58 cents. The change is an annual adjustment based on an IRS evaluation of fixed and variable costs of operating a vehicle. Usually, the rate holds for the entire year, but the IRS has sometimes made an adjustment mid-year.