The rules for deducting depreciation expenses on vehicles used for business purposes have been liberalized under current tax law, but they remain complicated. In addition, annual inflation adjustments make allowable depreciation deductions moving targets. (See "First-Year Depreciation Deductions under the TCJA" below.) Here's how to calculate depreciation deductions for cars, SUVs, pickups, and vans used in your business.
Business owners must choose between the two methods below for claiming allowable business-use vehicle deductions.
For 2024, the standard mileage rate is 67 cents per business mile for 2024 (up from 65.5 cents for 2023). This rate is meant to cover all business vehicles expenses, such as gas, maintenance, repairs, tires, and insurance.
Important: A depreciation allowance is also built into the standard rate
Depreciation calculations come into play only if you choose this method. As the name suggests, the more time-consuming actual expense method tracks all vehicle-related costs based on the amount you actually paid. Depreciation is a non-cash expense, requiring specific calculations under the tax rules.
You can add actual expenses for parking and fees if you use the standard mileage rate. But your deductions will usually be higher under the actual expense method than the cents-per-mile method. If you choose to use the actual expense method, the rules for calculating depreciation write-offs vary depending on the type of vehicle you're using in your business.
Source: TMA Accounting
