Vehicle expense vs. mileage rate

[Brenda Budzinski]

What are the pros and cons of vehicle expenses?  Ive read there are two different ways to write off this expense.  Actual expenses like car value depreciation plus insurance, gas, repairs, oil changes or the other option straight mileage.  Im confused as to which method is best for my situation.  I have a 15 yr old vehicle that I have depreciated some time ago. Im currently keeping track of miles and using flat mileage rate.  Is this the best tax advantage?  I usually drive 4K miles (@ $.52/mile)  anually but car repairs at my vehicles age could be costly.  

 If I buy a new vehicle what is the best method of expense write off?

If I use the car repair method do I still have to keep track of miles of what/where/when in a log book?

[Paul Caputo]

What you've read is correct: you get to pick if you want to depreciate the vehicle as it's annual expense or use mileage as the annual expense. 

Which way is better depends largely on you. Most vehicles are 5 year assets according to the Modified Accelerated Cost Recovery System (MACRS) so they get depreciated over 5 years with 200% declining balance. 

If the IRS knew you were taking mileage on a vehicle that is fully depreciated they would disallow the mileage since you already took the depreciation. They let you pick your cake but you have to eat it. 

When using a vehicle for well over 5 years it's usually gonna make more sense to use mileage. If it's used for about 5 years or less depreciation makes more sense. But that all depends on the purchase price, annual mileage and how long you hold the vehicle. 

To use your numbers here's an example: You use that truck for 15 years and put about 4K miles on it per year. You've gotten about $2K mileage deduction per year for 15 years or about $30K in tax deductions. If that truck cost $30K, you'd get $30K in tax deductions in the first 5 years and nothing for the next 10. Now if the truck only cost $15K you'd get $15K in tax deductions over 5 years and nothing on the next 10 with depreciation, but if you elect mileage that would be the same as above. 

As your annual mileage goes up the more it makes sense to use mileage instead of depreciation. If you were doing 8K miles per year the depreciation would be the same but mileage would double so that'd make more sense to do mileage with a longer hold period. 

I wish there was a better answer, but as with most everything on here it depends on your specific situation. 

Look at how long you intend to own the new truck and figure it both ways to see what makes more sense. Basically do mileage if your mileage deductions over time would be higher than depreciation, but it's gonna take a lot of miles and a lot of time for mileage to overtake depreciation.