Question

6. (A). During 2018, Eileen (a self-employed accountant who also works part-time for a CPA firm) used her car as follows: 12,000 miles (business), 1,400 miles (commuting), and 4,000 miles (personal). In addition, she spent $440 for tolls (business) and $620 for parking (business).

If Eileen uses the automatic mileage method, what is the amount of her deduction?

6. (B) Jeff uses his automobile for both business and personal use and claims the automatic mileage rate for all purposes. During 2018, his mileage was as follows:

Personal

Business

Medical

Charitable

Qualifying education (MBA program) How much can Jeff claim for mileage?

Miles Driven 4,000

8,000

1,800

1,500 800

Answer 1

As per IRS provision, deduction is allowed for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including
1) to 2) ...
3) Traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business;
Accordingly, if you use your own car onlyfor the purpose or inconnection with running your business then you may get deduction of all ordinary and necessary expenses incurred on account of use of car for the business purpose.
However, if you use the car for both business and personal purposes, you may deduct the expenses only to the extent expenses/ use related to business use. Thus, balance portion which is related to personal use are not allowed as deduction while computing business income/ loss.
Amount of deductible car expense can be computed by using any one below method                            a) the standard mileage rate method; or                                                                                              b) the actual expense method.
Method which can give larger deduction can be selected for computing deduction amount
There are various conditions for claiming deduction as per standard mileage rate.
Based on the above provision, we have made following computation
A)	Eileen
	Business use of Car	A	12000 miles
	Standard rate as applicable for 2018	B	54.5 per cent per mile
	Deduction	C (A *B)	654000
Assuming, Eileen meets conditions for claiming deduction as per standard mileage rate method, Eileen can claim dedction of $ 654000 while computing her income from self employment. All other miles viz commuting and personal are not eligible for deduction. No other cost deduction is given.
B) Jeff
	Automatic Mileage deduction (ie. Standard rate deduction)
	Particulars	Mileage	Standard Rate	Deduction
		A	B	C (A*B)
	Use of Automobile for Business purpose	8000	54.5 per cent per mile	436000
	Use of Automobile for Medical purpose	1800	18 per cent per mile	32400
	Use of Automobile for Charitable purpose	1500	14 per cent per mile	21000
	Standard rate as applicable for 2018
	Total Deduction			489400