7 Tax Tips for Schedule C Auto Expenses

I'm a big fan of the standard mileage rate for sole proprietors using Schedule C. Here's why.

Tip 1 - It's Easier: I always encourage my tax clients to use the standard mileage rate. The rates are very generous, and, unless you use your vehicle 100% for business, it's much easier to figure your deduction using the rates, rather than using actual expenses.

Tip 2 - It's More Flexible: As a general rule, it is usually better to take the standard mileage rate the first year you put a car or truck into service, rather than actual expenses. This allows you some flexibility in subsequent years, because you can choose which to take.

Tip 3 - It's More Flexible, Again! The reverse is not true. If you take actual expenses the first year you put a car or truck into service, you must continue to use actual expenses thereafter. Take this into account when you are tempted to take a hefty Section 179 deduction the first you your vehicle is placed in service. Make sure it will be worth it in the long run.

Tip 4 - You Can Write Off More: For people who drive many business miles each year, taking the standard mileage rate may allow you to write off more than the value of your vehicle over a period of years. How often does this happen in the tax code?

Tip 5 - Keep Good Records: Keep a log book in your car and record the following information each time you drive the car for business reasons:

1. Date
2. Business Reason/Place Visited
3. Beginning Odometer Reading
4. Ending Odometer Reading

Tip 6 - It's Easily Defended: If you get audited and you've kept a good log book, I can almost guarantee that your mileage deduction will remain intact. I know this from personal experience in an IRS audit!

Tip 7 - Less Paperwork: When using actual expenses, a certain form is needed, called a 4562. If you don't need to depreciate any other property, and you use the standard mileage rate, you don't need a 4562. The mileage deduction will be shown on page 2 of your Schedule C.