What is the mileage deduction and do I qualify?

Basically, if you use your vehicle solely for business purposes, you may deduct the entire cost of its operation with some limits. However, if you use your vehicle for both business and personal purposes, you may only deduct the cost of its business use.

For 2012, the standard mileage rates are as follows:

• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

In order to take the standard mileage deduction, you must meet the following requirements:

• You must not operate five or more cars at the same time, as in a fleet operation
• You must not have claimed a depreciation deduction for the car using any method other than straight-line
• You must not have claimed a Section 179 deduction on the car
• You must not have claimed the special depreciation allowance on the car
• You must not have claimed actual expenses after 1997 for a car you leased
• You cannot be a rural mail carrier who received a "qualified reimbursement"

To use the actual expense method, you must determine what it actually costs to operate your vehicle for the portion of the overall use that is business use. You can include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles.

You will need to keep adequate records of these expenses or be able to provide sufficient evidence to their validity.

For information about depreciation - a complex topic - please click here.