Anna, a proprietor, drove her car a total of 14,000 miles in 2022.

Question

Anna, a proprietor, drove her car a total of 14,000 miles in 2022. Of those, 12,000 were for business. Anna’s actual expenses for auto were gasoline, $3,000, maintenance $1,600, insurance $1,100, depreciation $3,500 and car washes $400. Calculate the amount of Anna’s 2022 business expense for auto using the actual expenses and using the standard mileage rate. Which method would you advise Anna to use?

Answer 1

The actual expense method ( 3000 + 1600+ 1100 +3500 + 400) = 9600 x 12,000 /14,000 business use % ) would give Anna an $8,228 deduction. The standard mileage method, though easier to calculate (12,000 business miles x .582 standard mileage rate for 2022) would give Anna a $6,984 deduction. Therefore Anna would have a higher tax deduction if she uses the actual expense method.