Business accounting question about mileage deduction

[disneysteve]

I know there are a few accounting folks here. Maybe someone can answer a question.

I know there is an IRS figure of $0.67/mile that you can deduct for business mileage. That is to account for gas and wear and tear. But what if you use a rental vehicle? If you deduct both the cost of the rental and the mileage allowance wouldn’t you be overstating your costs? Is there some adjustment to the IRS figure in that case? I hope that makes sense.

 

[sakowitzm]

I know there are a few accounting folks here. Maybe someone can answer a question.

I know there is an IRS figure of $0.67/mile that you can deduct for business mileage. That is to account for gas and wear and tear. But what if you use a rental vehicle? If you deduct both the cost of the rental and the mileage allowance wouldn’t you be overstating your costs? Is there some adjustment to the IRS figure in that case? I hope that makes sense.

*Not an expert* You're correct - you can't do both. If you drive your own vehicle, you can either claim for $0.67/mile OR the actual costs incurred while driving - likely just the gasoline. If you rent a vehicle you can claim for the actual cost of the rental and whatever gas you put in that car, at actual cost.

 

[SecondCor521]

Rental of vehicles is reported on line 20a of Schedule C.

The 67 cents a mile thing is reported on line 9 (and Part IV) of Schedule C.

 

[ut2sua]

*Not an expert* You're correct - you can't do both. If you drive your own vehicle, you can either claim for $0.67/mile OR the actual costs incurred while driving - likely just the gasoline. If you rent a vehicle you can claim for the actual cost of the rental and whatever gas you put in that car, at actual cost.

This ^^^. Also, I believe you can't flip-flop from one method to another in future years. IOW, once you claim actual cost, you won't be able to switch to mileage in future years for the same vehicle.
Edit to add I am not a tax expert. Just a soul suffering/surviving the US tax system year after year (so double check my understanding to be safe).

 

[sakowitzm]

Not sure why this ^^^ would be the case?

 

[markelp]

Perhaps this is the "can't flip-flop from one method to another" reference:

Generally, the Modified Accelerated Cost Recovery System (MACRS) is the only depreciation method that can be used by car owners to depreciate any car placed in service after 1986. However, if you used the standard mileage rate in the year you place the car in service and change to the actual expense method in a later year and before your car is fully depreciated, you must use straight-line depreciation over the estimated remaining useful life of the car.

Topic no. 510, Business use of car | Internal Revenue Service

IRS Tax Topic on deductible car expenses such as mileage, depreciation, and recordkeeping requirements.

www.irs.gov

 

[disneysteve]

Rental of vehicles is reported on line 20a of Schedule C.

The 67 cents a mile thing is reported on line 9 (and Part IV) of Schedule C.

But can/should you do both or is it one or the other?

 

[disneysteve]

This ^^^. Also, I believe you can't flip-flop from one method to another in future years. IOW, once you claim actual cost, you won't be able to switch to mileage in future years for the same vehicle.
Edit to add I am not a tax expert. Just a soul suffering/surviving the US tax system year after year (so double check my understanding to be safe).

That doesn’t apply here since I’m talking about a rental. I’m not depreciating a vehicle I own.

 

[sakowitzm]

But can/should you do both or is it one or the other?

I don't know why you couldn't do both. Say, during one calendar year you rented a car a few times for work, and you drove your own vehicle a couple of time for work. Report the rental expense (to include fuel) as appropriate and - separately - report your mileage @ $0.67/mile (or the actual cost). They're both legit. Hope an expert will confirm or challenge; I'm no expert.

 

[Jerry1]

Rental of vehicles is reported on line 20a of Schedule C.

The 67 cents a mile thing is reported on line 9 (and Part IV) of Schedule C.

But can/should you do both or is it one or the other?

It's one or the other based on which car you're driving. You cannot use the 67 cents on line 9 for any of the miles driven in the rental car. You would put the cost of the gasoline on line 9. From the instructions for Schedule C (from the IRS).

If you deduct actual expenses:
• Include on line 9 the business portion of expenses for gasoline, oil, repairs, insurance, license plates, etc.;

Therefore, in this case, you'd be claiming actual expenses. You'd deduct the rental cost and the actual gas cost plus any other cost you may have, though with a rental, I'm not sure what else there would be.

Then, if you drove a different car for some period of time during the year for business purposes, then you could use the standard mileage rate for the mile driven in that car.

I"m no expert but I am a CPA and my answer is based on the IRS instructions as I read them.

https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

 

[disneysteve]

It's one or the other based on which car you're driving. You cannot use the 67 cents on line 9 for any of the miles driven in the rental car. You would put the cost of the gasoline on line 9. From the instructions for Schedule C (from the IRS).

If you deduct actual expenses:
• Include on line 9 the business portion of expenses for gasoline, oil, repairs, insurance, license plates, etc.;

Therefore, in this case, you'd be claiming actual expenses. You'd deduct the rental cost and the actual gas cost plus any other cost you may have, though with a rental, I'm not sure what else there would be.

Then, if you drove a different car for some period of time during the year for business purposes, then you could use the standard mileage rate for the mile driven in that car.

I"m no expert but I am a CPA and my answer is based on the IRS instructions as I read them.

https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

Thanks that’s exactly what I was thinking. Doing both would be double dipping. I can claim the rental, gas and tolls, but not the mileage allowance.

 

[SecondCor521]

It's one or the other based on which car you're driving. You cannot use the 67 cents on line 9 for any of the miles driven in the rental car. You would put the cost of the gasoline on line 9. From the instructions for Schedule C (from the IRS).

If you deduct actual expenses:
• Include on line 9 the business portion of expenses for gasoline, oil, repairs, insurance, license plates, etc.;

Therefore, in this case, you'd be claiming actual expenses. You'd deduct the rental cost and the actual gas cost plus any other cost you may have, though with a rental, I'm not sure what else there would be.

Then, if you drove a different car for some period of time during the year for business purposes, then you could use the standard mileage rate for the mile driven in that car.

I"m no expert but I am a CPA and my answer is based on the IRS instructions as I read them.

https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

I generally agree with the above with two exceptions and a side observation:

1. The rental cost / gas / tolls would always go on line 20a, not line 9.

2. The references above to line 9 and gas costs are if you choose to use the actual cost method instead of the 67 cent per mile allowance. This could confuse / conflate the issue. You should always put rental car costs on line 20a and follow the instructions there. For business use of a personal vehicle, those go on line 9 and you can either (a) use the 67 cent per mile allowance (most people), or (b) do the actual cost method.

3. Side observation: you can also include the cost of tolls and parking on line 9 when you're using your own car and the 67 cent per mile allowance.

Not a CPA, but a six-year AARP Tax Aide tax volunteer.

 

[ut2sua]

Perhaps this is the "can't flip-flop from one method to another" reference:

Generally, the Modified Accelerated Cost Recovery System (MACRS) is the only depreciation method that can be used by car owners to depreciate any car placed in service after 1986. However, if you used the standard mileage rate in the year you place the car in service and change to the actual expense method in a later year and before your car is fully depreciated, you must use straight-line depreciation over the estimated remaining useful life of the car.

Topic no. 510, Business use of car | Internal Revenue Service

IRS Tax Topic on deductible car expenses such as mileage, depreciation, and recordkeeping requirements.

www.irs.gov

Once you start claiming "actual cost" which is a depreciation of the bought vehicle (I know I am not answering OP's question here since they have a rental), then I believe the IRS wants you to stay in that method. If I remember correctly, TT used to have a note saying you can't do both, so I never bother to track into the why. I could be wrong here since I haven't checked on this for a number of years.

 

[Aerides]

One or the other, but no, you cannot count the mileage on a rental, you count the cost of the rental. On your own car you count mileage.

 

[ut2sua]

Thanks that’s exactly what I was thinking. Doing both would be double dipping. I can claim the rental, gas and tolls, but not the mileage allowance.

This is what I think the IRS is seeing it. We have always bought (and not rent/lease), so I have never looked into claiming rental vehicles. It should be legal to claim maintenance, parking etc. if you don't do the mileage.

 

[disneysteve]

Thanks everyone. I had tallied up all of my numbers and then realized I had probably done it wrong. I'll go back and fix it before I send it all to our CPA. 2024 was the first year I had the rental car business travel to deal with.

 

[Jerry1]

I generally agree with the above with two exceptions and a side observation:

1. The rental cost / gas / tolls would always go on line 20a, not line 9.

2. The references above to line 9 and gas costs are if you choose to use the actual cost method instead of the 67 cent per mile allowance. This could confuse / conflate the issue. You should always put rental car costs on line 20a and follow the instructions there. For business use of a personal vehicle, those go on line 9 and you can either (a) use the 67 cent per mile allowance (most people), or (b) do the actual cost method.

3. Side observation: you can also include the cost of tolls and parking on line 9 when you're using your own car and the 67 cent per mile allowance.

Not a CPA, but a six-year AARP Tax Aide tax volunteer.

I don’t agree with #1 & 2 but it really wouldn’t matter one bit. The main question is whether you can take the standard mileage on a rental along with the rental cost an we’re all in agreement that you cannot. Which line the proper cost go on is a difference without a distinction.

 

[SecondCor521]

Respectfully:

I don’t agree with #1 & 2 but it really wouldn’t matter one bit.

People can go read the instructions to Schedule C for themselves to decide if anyone cares. I still think I'm right, but then again that's a pretty common thing for me to think, and I'm sometimes wrong also.

The main question is whether you can take the standard mileage on a rental along with the rental cost an we’re all in agreement that you cannot.

I agree. My point above, and my previous post, were an attempt to point out why this is true, not just that it is true.

Which line the proper cost go on is a difference without a distinction.

It doesn't matter which line in this case, but in other tax situations where you put something does matter. Sometimes there are choices and some are better than others.

And it doesn't take that much more effort to report the expenses on the proper line. Makes it clearer for the taxpayer and the IRS later, for one thing.

I don't want to get into a heated argument, so unless there are specific questions or egregious inaccuracies, I'll give you any further and final word on this part.

 

[USGrant1962]

^^^
I consult a little and find the categorizations of some business expenses on Schedule C to be nebulous, at best. In the end, I don't think which line they end up on matters very much as long as they are all legit expenses. But I don't have any expenses that get special treatment (good or bad) either.

 

[disneysteve]

I don’t agree with #1 & 2 but it really wouldn’t matter one bit. The main question is whether you can take the standard mileage on a rental along with the rental cost an we’re all in agreement that you cannot. Which line the proper cost go on is a difference without a distinction.

Which lines things go on is for our CPA to mess with. I just want to make sure I send her accurate data.

 

[Jerry1]

Respectfully:



People can go read the instructions to Schedule C for themselves to decide if anyone cares. I still think I'm right, but then again that's a pretty common thing for me to think, and I'm sometimes wrong also.



I agree. My point above, and my previous post, were an attempt to point out why this is true, not just that it is true.



It doesn't matter which line in this case, but in other tax situations where you put something does matter. Sometimes there are choices and some are better than others.

And it doesn't take that much more effort to report the expenses on the proper line. Makes it clearer for the taxpayer and the IRS later, for one thing.

I don't want to get into a heated argument, so unless there are specific questions or egregious inaccuracies, I'll give you any further and final word on this part.

We’re on the same page. Nothing disrespectful taken. And yes, sometime the lines and details can make a big difference.

 

[target2019]

Which lines things go on is for our CPA to mess with. I just want to make sure I send her accurate data.

Would be an appropriate test for a CPA. If you send the rental receipt, and separately log the miles, will they detect the conflict?

 

[SecondCor521]

Would be an appropriate test for a CPA. If you send the rental receipt, and separately log the miles, will they detect the conflict?

Almost certainly not. There are a zillion things to look out for, and at the end of the day the client signs a form saying that they've reviewed the tax return and it is correct and accurate to the best of their knowledge.

I'm a volunteer tax preparer, so I know I'm held to a different standard than a professional tax preparer. But I think the standard for them is something like due diligence, so the data the client brings has to basically make sense, and the preparer has to ask reasonable questions in certain areas (like EITC). But the preparer isn't obligated to verify and crosscheck everything. And the taxpayer still signs the return.

There's another reason. The tax software we use takes the business miles reported by the client for part IV and multiplies it by the appropriate mileage rate and puts that on line 9. Normally I would expect the client to come in with their mileage for the year. If they choose to put mileage in their log on a rental car, then that would be their error. We're not going to go line by line, comment by comment, through their mileage log.

 

[disneysteve]

Would be an appropriate test for a CPA. If you send the rental receipt, and separately log the miles, will they detect the conflict?

Definitely not. I'm not about to feed her faulty data to see if she catches it.

Besides, in this situation, it wouldn't even work. Yes, I have a vehicle rental to account for but I also have about 2,800 business miles on my personal vehicle to claim. She would have no possible way of knowing, just by looking at the numbers, if my mileage figure is correct.

 

[target2019]

Definitely not. I'm not about to feed her faulty data to see if she catches it.

Besides, in this situation, it wouldn't even work. Yes, I have a vehicle rental to account for but I also have about 2,800 business miles on my personal vehicle to claim. She would have no possible way of knowing, just by looking at the numbers, if my mileage figure is correct.

A competent CPA would see the car rental, and ask about how you recorded the miles driven. That is all from me.