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Christian

Standard Mileage Rate

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I set up a client some time back using the standard mileage rate. I switched to using his actual expenses a year or two later. I will be using the mileage rate this year and going forward. How exactly do I account for the depreciation already used ? 

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https://www.irs.gov/taxtopics/tc510

 

Depreciation

Generally, the Modified Accelerated Cost Recovery System (MACRS) is the only depreciation method that can be used by car owners to depreciate any car placed in service after 1986. However, if you used the standard mileage rate in the year you place the car in service and change to the actual expense method in a later year and before your car is fully depreciated, you must use straight-line depreciation over the estimated remaining useful life of the car. There are limits on how much depreciation you can deduct. For additional information on the depreciation limits, please refer to Topic No. 704. Publication 463, Travel, Entertainment, Gift, and Car Expenses explains the depreciation limits and discusses special rules applicable to leased cars.

 

This may not answer your question, but there's another link on that site. 

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If you choose mileage in the first year, you will use SL depreciation in any year you take actual expenses.

If you're using ATX, it properly calculates the cents per mile depreciation for you (Yay!) in any year you take mileage, so your depreciation will be correct, even if you switch between standard mileage and actual.

This is assuming you used fixed assets to enter the mileage. If you used Sch C then you will need to calculate the prior mileage depreciation manually to enter into fixed assets.

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Just so understand. If mileage used in first 2 years, actual used after that, then want to switch back to mileage then what would the rate be if all depreciation has been used?

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2 hours ago, TAXMAN said:

Just so understand. If mileage used in first 2 years, actual used after that, then want to switch back to mileage then what would the rate be if all depreciation has been used?

The beauty of mileage is that the depreciation component does not go away after the vehicle is fully depreciated. So you can end up getting more depreciation than the car cost, but for fixed assets purposes, the net value does not go below zero. LOOPHOLE!🤓

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I am so glad you pointed that out. I raised that very question last year and was surprised to discover that you did not stop using the depreciation component of the mileage rate even after the depreciation record indicated no more was available to deduct. I cannot imagine how those talented tax writers in the Congress missed that one. 

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13 minutes ago, Christian said:

I cannot imagine how those talented tax writers in the Congress missed that one. 

Shhhhhhhhhhh…….they will hear you.

Tom
Modesto, CA

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