By Howard Scott With the "standard cost" mileage allowance rising to 34.5 cents per mile, it's time to convert all cars and pickup trucks from "actual" to standard cost. If you own three vehicles traveling 70,000 total miles, for example, the standard cost expense is $24,150 (34.5 cents x 70,000). Using actual cost, you could save as much as $8,000. Actual cost, which multiplies itemized total vehicle expenses for gas, repairs, insurance, and depreciation by percentage of business use would probably average 30% less at just $16,000 ($6,000 depreciation -- the first year maximum is $3,150 -- plus about $10,000 in other expenses). The other advantage is that, if you start with standard cost, you can switch to actual cost in a year when your expenses were unusually high. But if you start with actual cost, you can't switch. Either method also applies to leased vehicles.
--Howard Scott is a business writer and small business tax preparer in Pembroke, Mass.