# 2017 What's Best? IRS SMR or Actual Expenses



## UberTaxPro (Oct 3, 2014)

If you keep good records (bookkeeping) you might find this helpful for your 2017 taxes. For most Uber/Lyft drivers the standard mileage rate works better in my opinion. But, everyone's situation is different. Here's a helpful worksheet to compare.

https://www.bradfordtaxinstitute.com/Tools/IRSvActual.2017.v1b.htm


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## Frontier Guy (Dec 27, 2015)

Started my taxes a week ago, just playing with numbers. Since I've been sick all day and couldn't drive NYE/MYE morning, I'm working my deductions using estimated income from Quicken. At present, I get the bigger deduction using actual expenses as compared to mileage, all because I had two large vehicle expense last year, had to buy new tires, and had to get my 60K service done.


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## UberTaxPro (Oct 3, 2014)

Frontier Guy said:


> Started my taxes a week ago, just playing with numbers. Since I've been sick all day and couldn't drive NYE/MYE morning, I'm working my deductions using estimated income from Quicken. At present, I get the bigger deduction using actual expenses as compared to mileage, all because I had two large vehicle expense last year, had to buy new tires, and had to get my 60K service done.


Did you factor out the personal use of your vehicle for the tires and 60k service? From your mileage log determine what % use was business and apply that to the expenses. Remember, if you use actual expenses this year you'll have to keep using actual expenses every year going forward for this vehicle.
Also, if you use actual expense method you can deduct depreciation, however, if you quit driving before the life expectancy of your car you'll have to re-capture some of that depreciation. You might need to hire someone for that which will be another expense.


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## scrooge64 (Sep 10, 2017)

I wonder if there is a good rule of thumb for the decision of SMR vs. actual expenses for this deduction. For example, someone with a Honda Civic that gets 40 mpg with regular gasoline would probably be better off with the SMR, while someone with a BMW 5-Series that gets 20 mpg with premium gasoline would be better off with actual expenses.


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## Frontier Guy (Dec 27, 2015)

UberTaxPro said:


> Did you factor out the personal use of your vehicle for the tires and 60k service? From your mileage log determine what % use was business and apply that to the expenses. Remember, if you use actual expenses this year you'll have to keep using actual expenses every year going forward for this vehicle.
> Also, if you use actual expense method you can deduct depreciation, however, if you quit driving before the life expectancy of your car you'll have to re-capture some of that depreciation. You might need to hire someone for that which will be another expense.


Yes, I have a notebook I keep all mileage in, mileage at the start of the year and end of year, as well as starting/ending for each day driven. My normal work commute is 13 miles ea. way. For the year, I had 29,700 miles, of which 19,xxx was rideshare, 6,700 was normal commute, the rest was general use. I plan to keep my pickup for a long time, hopefully (knock on wood), I'll be done with rideshare by May 1st, June 1st at the latest (really kind of depends on how the taxes and a few other things play out).


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## Mars Troll Number 4 (Oct 30, 2015)

The important thing about standard mileage rates is that it averages out over time (5o,000+ miles)

But if you use actual expenses the first year you are stuck with it.


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## Frontier Guy (Dec 27, 2015)

Well, I started in 2015, so the first two years I took mileage, this year it looks like itemized will save me more. As I said above, the only reason I'm doing it this way is those two large purchases, without the 60K service, I would have taken mileage. But, once I get my 1099's from Uber and Lyft, I may change my mind.


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## UberTaxPro (Oct 3, 2014)

Frontier Guy said:


> Well, I started in 2015, so the first two years I took mileage, this year it looks like itemized will save me more. As I said above, the only reason I'm doing it this way is those two large purchases, without the 60K service, I would have taken mileage. But, once I get my 1099's from Uber and Lyft, I may change my mind.


Just make sure you factor in the depreciation recapture into your decision. Just so you know...even if you don't take the depreciation deduction you still have to recapture the depreciation you should've taken!
http://loopholelewy.com/loopholelew...s/car-expenses-08j-depreciation-recapture.htm


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## Skinny1 (Sep 24, 2015)

Frontier Guy said:


> Well, I started in 2015, so the first two years I took mileage, this year it looks like itemized will save me more. As I said above, the only reason I'm doing it this way is those two large purchases, without the 60K service, I would have taken mileage. But, once I get my 1099's from Uber and Lyft, I may change my mind.


You can't take mileage and then go to actual in different years. Unless you used a new vehicle on the platform you are stuck with SMR.


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## Older Chauffeur (Oct 16, 2014)

Skinny1 said:


> You can't take mileage and then go to actual in different years. Unless you used a new vehicle on the platform you are stuck with SMR.


Not accurate. The requirement for a car you own (it doesn't have to be new) is that you must use the SMR the first year you use it in business, and then you can switch back and forth in later years. If you lease you have to pick one and stick with it for the entire lease. It's explained in IRS Pub. 463,page 16.


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## Skinny1 (Sep 24, 2015)

Thanks for clarifying.


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## robstv (Aug 20, 2017)

Older Chauffeur said:


> Not accurate. The requirement for a car you own (it doesn't have to be new) is that you must use the SMR the first year you use it in business, and then you can switch back and forth in later years. If you lease you have to pick one and stick with it for the entire lease. It's explained in IRS Pub. 463,page 16.


What if you do not own the lease car in year 1, are not married to car owner, so use actual. But then you become married in year 2 to car leaser, filing jointly. Same thing, must stick with actual?


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## Older Chauffeur (Oct 16, 2014)

robstv said:


> What if you do not own the lease car in year 1, are not married to car owner, so use actual. But then you become married in year 2 to car leaser, filing jointly. Same thing, must stick with actual?


 Okay, I'm confused.  By definition you don't "own" a leased car. Maybe you could rephrase the question?

I think that the rule for leased vehicles is that you pick one or the other, and that's it for the duration of the lease, unaffected by marital status.

Somewhere in one of the IRS publications related to car expenses I read the phrase, " the first year the vehicle becomes available to you." So it might be that the lessee didn't use the vehicle for business the first year, so you would be making the choice midterm, but then have a commitment for the remaining lease term.

If I understand what you're describing, however, I suggest that you read carefully the terms of the lease with regard to commercial/for hire/livery use, as well as who is allowed to operate the vehicle.

Maybe UberTaxPro will see this and have an answer for you. I'm just guessing!


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## UberTaxPro (Oct 3, 2014)

robstv said:


> What if you do not own the lease car in year 1, are not married to car owner, so use actual. But then you become married in year 2 to car leaser, filing jointly. Same thing, must stick with actual?


Are you saying that you used someone else's leased car to ride-share for a year and deducted the actual expenses? Then married the person the second year?


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## robstv (Aug 20, 2017)

UberTaxPro said:


> Are you saying that you used someone else's leased car to ride-share for a year and deducted the actual expenses? Then married the person the second year?


Pretty much looks like what I must do (not the married part, the tax part)..
Of course I can not deduct lease payments unless it is made to her, and she claims it as income. Not an option. Will I be allowed to claim lease payments in later years, when we file jointly?

Fiance leased a new car in September 2017, which I use exclusively for Uber (very part time, long story). We've lived together 20 years, and this is a 3rd vehicle. I am listed on insurance and have added rideshare to policy. I know I can not use SMR for 2017 since I do not own car and am not married to lessee to file jointly. Looks like by using actual, I will be stuck with that indefinitely? Or does getting married later in 2018 change that if we then file jointly in future years?

Lease in her name is 3 years, and will purchase leased car after that in my name (or both of our names). Will I be allowed to switch to SMR after vehicle changes ownership at that time?


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## UberTaxPro (Oct 3, 2014)

robstv said:


> Pretty much looks like what I must do (not the married part, the tax part)..
> Of course I can not deduct lease payments unless it is made to her, and she claims it as income. Not an option. Will I be allowed to claim lease payments in later years, when we file jointly?
> 
> Fiance leased a new car in September 2017, which I use exclusively for Uber (very part time, long story). We've lived together 20 years, and this is a 3rd vehicle. I am listed on insurance and have added rideshare to policy. I know I can not use SMR for 2017 since I do not own car and am not married to lessee to file jointly. Looks like by using actual, I will be stuck with that indefinitely? Or does getting married later in 2018 change that if we then file jointly in future years?
> ...


Unfortunately, with your current situation, you can't deduct any vehicle expenses for 2017. You must own, lease, or be married to the person that does to meet the eligibility requirements for vehicle deductions under *both* methods, actual expenses or SMR. 
Possibly, you could have set up a lease agreement with her last year but it would need to be in writing, would have to pass any legal tests, and you'd have to actually make payments to her! And she would have to declare the income on her return


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## robstv (Aug 20, 2017)

UberTaxPro said:


> Unfortunately, with your current situation, you can't deduct any vehicle expenses for 2017. You must own, lease, or be married to the person that does to meet the eligibility requirements for vehicle deductions under *both* methods, actual expenses or SMR.
> Possibly, you could have set up a lease agreement with her last year but it would need to be in writing, would have to pass any legal tests, and you'd have to actually make payments to her! And she would have to declare the income on her return


Thanks, that was what I was expecting for 2017. No deductions for car payments, mileage, depreciation, etc, so no SMR or vehicle actual in that regard. But costs for expendables (fuel, oil, tires, battery, etc), can still be deducted as actual expenses, correct?

What I was not aware of was the discussion here about once you choose a method the first year, you must stick with that method (SMR or Actual) as long as same car is used. So please re-read my above post as to how 2018 and beyond will affect filing, after marriage at first, and then in 2.5 years when car changes from her lease to my or joint ownership.

I am guessing that I would still need to use actual for remaining term of lease, but since we will be married in 2018, I will be able to deduct "future lease payments" when filing jointly. Was hopeful that after lease is completed and car is purchased, it might appear as a different car or something, and enable me to switch to SMR at that point (2.5 years from now). Thanks


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## UberTaxPro (Oct 3, 2014)

robstv said:


> Thanks, that was what I was expecting for 2017. No deductions for car payments, mileage, depreciation, etc, so no SMR or vehicle actual in that regard. But costs for expendables (fuel, oil, tires, battery, etc), can still be deducted as actual expenses, correct?
> 
> What I was not aware of was the discussion here about once you choose a method the first year, you must stick with that method (SMR or Actual) as long as same car is used. So please re-read my above post as to how 2018 and beyond will affect filing, after marriage at first, and then in 2.5 years when car changes from her lease to my or joint ownership.
> 
> I am guessing that I would still need to use actual for remaining term of lease, but since we will be married in 2018, I will be able to deduct "future lease payments" when filing jointly. Was hopeful that after lease is completed and car is purchased, it might appear as a different car or something, and enable me to switch to SMR at that point (2.5 years from now). Thanks


"But costs for expendables (fuel, oil, tires, battery, etc), can still be deducted as actual expenses, correct?"
NO! That is the actual expense method! You can't use either the SMR or the actual expense method. I know it sucks but your out of luck with this one. In order to deduct any vehicle expense you must own, lease or be married to the one that owns or leases the vehicle with the related expense.

On the bright side, for 2018 even if you get married on 12/31/18 you'll still be able to deduct vehicle expenses for the entire year.

You can start with using the SMR for 2018 and then switch to actual expenses any year you want. Once you switch you can't go back for that vehicle. 
Or, you can start with the actual expense method in 2018 but you'd have to use that method for as long as you own the car. 
Most ride-share drivers are much better off with the SMR.
Also, any changes have to be made for a full tax year, you can't do any switching methods during the year.


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## robstv (Aug 20, 2017)

2017 tax wise was not much anyway, so deductions not needed, and the ability to use SMR in 2018 and beyond is what I was hoping for.
Thanks very much for the advice!


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