Question

Since purchasing the car three years ago, a taxpayer has used the standard mileage rate to compute his vehicle expense deduction. Which of the following statements is true regarding the taxpayer's current year vehicle expense deduction?

		The taxpayer cannot use the actual cost method to compute his vehicle expense deduction.
		The taxpayer can use either the standard mileage rate or actual cost method to compute his vehicle expense deduction.
		The taxpayer must use the actual cost method to compute his vehicle expense deduction.
		The taxpayer must use the standard mileage rate to compute his vehicle expense deduction.
		The taxpayer cannot use the standard mileage rate to compute his vehicle expense deduction.

Answer 1

The taxpayer can use either the standard mileage rate or actual cost method to compute his vehicle expense deduction.

There are some condition for the use of either the standard mileage rate or actual cost method to compute own vehicle expense deduction:-

1. You must use actual expenses if you used five or more vehicles simultaneously in your business

2. You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle.

3. You can take the standard mileage rate only if you owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service.

4. You can take the standard mileage rate only if you Leased the vehicle and are using the standard mileage rate for the entire lease period.

So in the present case after considering the above conditions the option "The taxpayer can use either the standard mileage rate or actual cost method to compute his vehicle expense deduction" is correct.