Using the IRS mileage allowance is much simpler, but toting up actual expenses may provide a bigger deduction. We usually use actual expenses, said Bruce Wertheim, a senior manager in the personal financial planning practice at the accounting firm of KPMG in New York. Actual expenses include not just gas and oil but depreciation or lease payments, insurance, automobile club memberships, license fees, car washes, repairs, maintenance and more. Wertheim said most people maintain the kinds of records needed to compute actual expenses. A record of mileage driven must be kept, whether you use the standard mileage rate or actual expenses.
Most people using their cars for business are likely to use a credit card to pay for gas purchases.
And most other eligible expenses are also likely to be paid by credit card or check. But there are cases in which the IRS mileage rate will produce a bigger deduction. As a general rule, the fixed mileage rate is likely to be the more valuable option if you put a lot of business mileage on a car that s not expensive to maintain or operate, said Jim Seidel, an editor at RIA in New York, an information provider for tax professionals. If your business mileage is lower, you have a gas-guzzling car or a lot of expensive repairs and maintenance, then you might come out ahead using actual costs, he said. When you first start to write off a car, it s important to assess which method is likely to yield the bigger deduction because you can t always switch from one method to the other.