Michelle is an employee who must use her personal automobile for employment-related business trips. During 2015, Michelle drives her car 60% for business use and incurs the following total expenses (100% use of car):
Gas and oil ………………………………. $10,000
Repairs …………………………………… 1,400
Depreciation ……………………………… 4,700
Insurance and license fees ……………….. 2,800
Parking and tolls (business related) ……… 400
Total ……………………………………… $19,300
Michelle drives her car a total of 40,000 miles (24,000 business miles) during 2015 and receives a reimbursement of 40 cents per business mile from her employer. Assume that an adequate accounting is made to Michelle’s employer.
a. What amount is deductible (before the 2% nondeductible floor) if Michelle uses the standard mileage method?
b. What amount is deductible (before the 2% nondeductible floor) if Michelle uses the actual cost method?
c. Can taxpayers switch back and forth between the mileage and actual methods each year?