If you have a job that requires you to travel a lot by car, you should be deducting your business expenses to prevent overpaying your taxes. These expenses include both “common operating expenses” for the self-employed as well as vehicle expenses—which can be a great way to lower your tax burden. To calculate your deductible vehicle expenses, it’s important to either accurately track mileage or accurately track actual expenses.
To deduct the costs associated with the use of your vehicle, you can use either the Standard Mileage method or Actual Expenses method. You won’t be able to take both deductions, so you need to evaluate which method provides the bigger tax benefit for you. To help with the decision, we’ve outlined the basics of each method and highlighted two examples that illustrate the differences among each.