Do you use your vehicle as a part of your business? If yes, then you can save hundreds or even thousands on your tax bill. The IRS gives you two a choice of options to claim the business use of vehicles. You can deduct either the actual expenses incurred or you can use the standard mileage rate.

Actual Vehicle Expenses

Just as it implies, it is the actual expenses you incur while using the vehicle… gas, oil changes, brake repair, tire rotation, insurance, towing, parking fees, lease payments, depreciation and any other vehicle expense you can conjure up.

Standard Mileage Rate

In lieu of claiming each and every vehicle expense; you can simply claim the mileage. The deduction is based on a set reimbursement rate. As it stands now, that rate is 58.5 cents per business use mile.

But when using this method, it is important to understand what encompasses a business mile. Basically, business miles accumulate any time your drive your vehicle for anything that is business related.

So if you need to run to Office Max to pick up a red Swingline stapler for your business, then you’ve got yourself some bona fide business miles.

- Need to take your business receipts to your business accountant who lives across town… business miles

- Gotta drive to an important meeting with some potential clients… business miles

- Heading down to the bank to make those hefty business income checks… business miles

- Got to run to the copy store to get 500 brochures printed… business miles… round trip, each way.

Now let’s say on your return trip you decide to stop at the grocery store that is right next to the copy store to pick up some salmon for dinner. So, is your return trip still business related? No… not unless you plan on having a client over for home cooked salmon at 8 o’clock… other than that your return trip just turned personal. No mileage deduction allowed.

And here is another one that people sometimes confuse… your commute to and from your office is not business related miles.

Say you are a self employed architect and you rent an office downtown. Getting to and from your office is considered your daily commuting miles… not business miles. But if you are at your office and you need to deliver some blueprints to a client who is 30 miles away… business miles.

Is it more advantageous to use the actual expenses or standard mileage method?

Well it just depends. If the cost to operate your vehicle is very expensive… then the actual expenses may be better. But if not, the standard mileage is better. You or your accountant will have to make that call.

But recently, the IRS has made using the standard mileage deduction much more attractive. Last year, the rate was 48.5 cents. At the beginning of this year it increased to 50.5 cents. Then in an effort to keep up with escalating fuel costs, the IRS raised the standard mileage rates to 58.5 cents. This new, higher rate took effect on July 1^st. 58.5 cents per mile can add up really quick… 1700 business miles can reduce your tax liability by almost $1,000.

But regardless of which method you use… keep good records. Be sure to either keep all of your receipts (neat, orderly and categorized) or get a mileage log book to keep track all of your miles. You can use a plain notebook or get a book that is specifically designed for logging miles. Or if you like to track stuff a little bit more new agey… then you can download this real simple mileage log Excel template for free courtesy of Microsoft.

Well, that is all for now folks! Happy Driving!