February 20th 2023

Happy Presidents Day – when we celebrate 45 of the 46 Presidents of the United States, and remember the damaging and potentially fatal mistake America made in 2016.

Time for another perhaps controversial tax reform proposal.

I love the Standard Mileage Allowance deduction for business, medical and charitable auto travel. But . . .

The Standard Mileage allowance for business use of the taxpayer’s personal auto should NOT include a component for depreciation of the vehicle.

For the most part taxpayers who use their car for business would own a car whether or not one was needed for business. The business use, however extensive, is basically secondary to personal use. I have always owned a car. Although a large percentage of my driving is for business, I own the car primarily for personal reasons, and would own a car whether it was needed for business or not.

Currently the standard mileage rate for business is calculated using an annual study of the fixed and variable costs of operating an automobile - including depreciation, insurance, repairs and maintenance, tires, and gas and oil. The rate for medical and moving purposes is based only on the base variable costs, like gas and oil and does not include depreciation.

Because the main reason for purchasing a car is personal and not business, depreciating the cost of purchasing the car, based on business use, is not really a true business expense. Only the business use percentage of actual operating expenses should be allowed as a deduction – because the more miles you drive the more you spend for gas, oil, repairs and maintenance, tires, and insurance.

Taxpayers using their car for business would continue to have the option of using the appropriate business use percentage or actual expenses, but without depreciation. Those who lease a car and use it for business could also use the standard mileage allowance or actual expenses, but this deduction would not include the monthly lease payment.

In the case of motor vehicles legitimately used 100% in a business – trucks, vans, limos, cars that are leased out to others (including one’s corporation) or used exclusively by couriers or for deliveries – a deduction should be allowed for 100% of the actual costs of maintaining and operating the vehicle, including depreciation. The standard mileage allowance would not be allowed here.

And the Standard Mileage Allowance for charitable travel should be the same as that calculated annually for medical and moving driving. The current deduction for charitable driving is set by Congress and has been 14 cents per mile for many decades (except for a couple of temporary increases in times of severe national emergency).

So, as always, what do you think?

TTFN

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