Rental Cars & the Standard Mileage Rate

Can an individual rent a vehicle for business purposes from a car rental agency such as Hertz or Budget and deduct the standard mileage rate as opposed to deducting the rental fee?

The standard mileage rate is allowed for leased vehicles (including cars, vans, pickups and panel trucks), provided that the standard mileage rate method is used for the entire term of the lease (Rev. Proc. 2010-51, Sec. 3.01).

The standard mileage rate is not allowed for fleet operations. Fleet operations are defined as using 5 or more vehicles simultaneously. Thus, taxpayers using no more than 4 vehicles at the same time are allowed to use the standard mileage rate (Rev. Proc. 2010-51, Sec. 4.05(1)).

The standard mileage rate includes an allowance for depreciation (24 cents per mile in 2016).

As the owner of the vehicles it is renting, the car rental agency will be depreciating the costs of those vehicles.

Although there is no restriction on using the standard mileage rate on leased vehicles, and although a car rented from the likes of Hertz and other car rental agencies is actually a short-term lease, the fact that the rental agency is depreciating the vehicle prevents a taxpayer who is renting the vehicle from claiming the standard mileage rate, which includes imputed depreciation. Multiple individuals or entities cannot depreciate the asset at the same time.   

 

June 29, 2016 by Lee Reams Sr.
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