Standard Mileage Rate

[Christian]

A client is getting ready to buy a new pickup in 2018. He is going to want me to assign the standard mileage rate or the use of actual expenses. In reviewing the standard mileage info I  do not see what part of the rate is calculated to be depreciation. If we choose the standard mileage rate for the initial year and use actual costs the next I am not certain I understand how the depreciation would work. He likes the new rules in which he can write off most if not all of the truck's cost the first year. His current use of the mileage rate yields some $15,000 in deduction and I don not see where writing off $17,000 for the truck in the first year is the best way to go as he will need to use the actual costs for the life of the truck. Any input is appreciated or if you can direct me to something that will clarify this many thanks.

[Lee B]

See IR 2017-204

See Notice 2018-3

See Rev Proc 2010-51

[Abby Normal]

ATX will calculate the correct depreciation for the year when you choose standard mileage. And, unless they need a huge 179/depreciation expense in 18, I would choose mileage to keep the option open to switch to actual later on. If you use actual in the first year, you must use actual forever for that vehicle. And if you do use standard mileage the first year, you must use SL depreciation in years you switch to actual.

Eventually, this chart will be updated with the 2018 depreciation portion of the standard mileage rate:

https://www.irs.gov/publications/p463#en_US_2017_publink1000298667

[Christian]

That pretty well clarifies it for me Abby. If he switches to actual expenses after the initial year I would simply multiply his first year mileage by 25 cents and deduct the resulting figure from the vehicle costs and use sl for the remaining years of service. Like you I am leaning toward his use of the standard mileage rate as he logs between 25,000 and 35,000 miles each year on his one service vehicle which is used for business mostly. Awhile back I raised the question of whether or not the depreciation percentage of the standard mileage rate was dropped after five years or so and was surprised to be told it was kept until the vehicle ended service.

[Abby Normal]

5 minutes ago, Christian said:

25 cents and deduct the resulting figure from the vehicle costs

If by that you mean, record that much depreciation, then yes. Also, if you're an ATX user, ATX records the 25 cent/mile depreciation automatically. You don't need to do anything.