standard vs actual

[taxdan]

I used the actual vehicle expense method for a client in 2010 and now realize that the standard method would have saved him a lot more money going forward. Did I read Pub 463 correctly that I can NOT amend that return to use the standard rate? It reads "You must make the choice to use the standard mileage rate by the due date (including extensions) of your return." I'm so upset at the amount of money the client will lose because of me.

Thanks for the input.

Dan

[joanmcq]

You're right, you're stuck with actual. I almost always use standard in the first year, especially if the vehicle is older/cheaper. No sense taking a big depreciation bump and then not only have to keep every darn receipt for the rest of the life of the car, and a lesser yearly deduction if your client drives his or her vehicles until they die.

[imjulier]

Yep-

You can go standard to actual but not actual to standard.

[taxxcpa]

Sometimes actual is much better the first year, but in the long-run it is almost always best to take the standard mileage allowance.

[JohnH]

I used the actual vehicle expense method for a client in 2010 and now realize that the standard method would have saved him a lot more money going forward. Did I read Pub 463 correctly that I can NOT amend that return to use the standard rate? It reads "You must make the choice to use the standard mileage rate by the due date (including extensions) of your return." I'm so upset at the amount of money the client will lose because of me.

Thanks for the input.

Dan

Just tell him he needs to buy a new vehicle to get a better tax deduction. Clients love it when they can use the tax write-off as an excuse to buy something new and shiny. :)

[taxdan]

It's funny John, I actually did ask him if he planned on buying a new vehicle soon!....after I stared at my computer for awhile realizing the mistake I had made in not choosing the standard deduction orginally.

I know I couldn't just switch to the standard method, but I was hoping there was a way to amend the original. The reason I took the actual up front is because he bought a new car with a nice depreciation deduction. But he drives so many darn miles for work, the standard would have been better in the long run. I just need to think about it a bit more in the future when I make that decision.

Thanks for the input everyone!

[jainen]

>>he drives so many darn miles for work, the standard would have been better in the long run<<

Taking the big deduction in the first year (I assume you mean bonus depreciation and 179) was perfectly appropriate. Now if he trades it in, Section 1031 will both preserve that past deduction and allow standard mileage rate in the future. On the other hand, that car is three years old now with high mileage, so his actual expenses will probably be going up anyway.