- 1 Track on the Go: How to Make the Most of Business Mileage Deductions
- 2 Medical Mileage Deduction: What is it and what does the IRS allow?
- 3 One Very Important Deduction You Could be Missing on Your Taxes
- 4 Mileage Tax Deduction: Claim the Mileage Tax Deduction or Take the Standard Deduction?
- 5 The Standard Mileage Deduction for Small Business Owners: How it Works
Track on the Go: How to Make the Most of Business Mileage Deductions
October 27, 2016
When tax time comes around, are you scrambling to gather auto deductions? Or worse, do you avoid deducting automobile expenses altogether, believing it’s too much of a hassle or not worth the effort?
Many small business owners miss out on significant tax deductions because they don’t keep track of business miles or do a poor job of record-keeping. But tracking miles doesn’t have to be a chore. You just need to get the right systems in place to make tracking business miles as easy and automatic as any other habit you follow day-after-day.
When you drive your car for business purposes, you can take the standard mileage deduction (54 cents per mile for 2016) for every mile you drive for work purposes. Keep in mind, one important thing to remember about deducting business miles is that commuting miles are not deductible. For instance, if you drive to the office from home and work there all day before driving home again, you cannot deduct those miles.
But many people, even those who work in a single location, often forget about the many trips they take that qualify for a deduction. Those trips might be for travel between offices, to a customer’s premises, running errands for their business, meeting clients for coffee or lunch, scouting locations for a photo shoot or traveling to and from the airport for a business trip.
If you work from home, you may be able to avoid the commuting rules entirely. The key is to have your home office qualify as your principal place of business. Then any business-related driving is deductible. You don’t commute to your workplace because you are already there when you wake up in the morning.
If your home office is not your primary place of business, you can still avoid the commuting rule when you travel to a temporary work location. A temporary work location is any place where you realistically expect to work for less than one year. For instance, say you are a bookkeeper, and you typically work from a sublet office. Driving to and from that office every day is considered commuting miles and not deductible. You agree to take on a temporary job that involves working from a client’s office twice a week for two months. The client’s office is a temporary work location so your daily drive to and from their office would be deductible.
Traditionally, small business owners track their mileage using a paper log. The log would include the number of miles driven (or beginning and ending odometer reading), the date and place of travel and the business purpose of the trip. Most people who choose to keep a paper log keep it in the car’s glove box and update the log each time they take a trip. This method is tried and true—that is, if you remember to use it and provide enough detail. Taxpayers have been denied deductions in the past because their logs were incomplete, contained too many errors or did not provide sufficient details.
Now, many people are turning to technology to facilitate mileage tracking. Apps such as MileIQ, TripLog and TrackMyDrive are available for iOS and Android. These apps make it easy to capture every mile you drive. Each time you take a trip, the app records your miles using GPS tracking and allows you to classify the trip as business, personal, medical, charity or another custom category. You can also record additional details such as who you met with and the business purpose of the trip.
If you didn’t keep good records in the past, those deductions are not lost. Keeping contemporaneous records is the preferred way, but the IRS does allow you to substantiate business miles by other means. If you are ever audited, the IRS will expect you to back up your reconstructed log by other methods.
One way of doing that is using your calendar. For example, your calendar might remind you that you met your client Susan for coffee at Starbucks on June 3rd at 9 a.m. In your reconstructed log book, you would note the date and location, that you met with Susan to discuss an upcoming project and calculate the round trip mileage. Hopefully, you will also have a receipt from that Starbucks visit as an additional backup. Between your recreated log, your calendar and the receipt, you have adequate documentation to withstand IRS scrutiny.
Standard Mileage vs. Actual Expenses: How to Deduct Auto Expenses
When you use one vehicle for both business and personal use, you have a choice of calculating your deductible car expenses by one of two methods: the standard mileage rate or the actual expense method. No matter which you choose, you will still need to track business miles.
Generally, you can calculate the deduction both ways, then use the one that gives you the biggest benefit. However, to use the standard mileage rate, you have to choose to use it in the first year that the car is used for business. In subsequent years, you can opt to use either the standard mileage rate or the actual expense method. If you lease the vehicle and choose the standard mileage method in the first year, you must use the standard mileage method for all subsequent years.
The standard mileage rate is issued by the IRS annually. For 2016, the rate is $0.54 per mile. So if you drove 5,000 business miles in 2016, your deduction under the standard mileage rate would be $2,700.
To use the actual expense method, you total up all of the costs of operating the vehicle and multiply them by the percentage of business use. Expenses include lease payments or interest paid on a financed vehicle, the cost of the license, insurance, title and registration, roadside assistance policies—as well as gas, maintenance, repairs, car washes, parking fees and tolls. For example, if your total vehicle expenses were $7,500 in 2016 and 30% of your miles were for business, your deduction would be $2,250 under the actual expense method. Keep in mind, fines and tickets, including parking tickets, are not deductible.
- Avoid rounding your business mileage: Taxpayers who have not kept adequate records of business miles try to use a nice round number like 15,000 business miles with 10,000 of them for business. In the examples above, we used round numbers to make it easy, but in the real world, nobody drives exactly 15,000 miles in one year. Using round numbers is a red flag to the IRS that you are estimating your mileage—a big no-no.
- Don’t record the same business and personal mileage number from the previous year: No matter how hard you try, you would never be able to drive the exact same number of miles five years in a row. If you do, expect the IRS to want to see how you managed it.
- Don’t try to claim 100% of trips as business miles: Unless you have a second vehicle that is used solely for business, you are using that car to go grocery shopping, go out on the weekends or take a road trip for vacation. You’re inviting the IRS for an audit if you claim your vehicle is never used for personal reasons.
In the income tax world, we have an old saying: “Pigs get fat. Hogs get slaughtered.” Don’t be a hog. Keep good records and maximize the deductions for which you are legitimately entitled. You won’t pay more than you owe and you’ll keep from getting slaughtered by an IRS auditor.
Freelance Contributor Janet Berry-Johnson is a CPA and a freelance writer with a background in accounting and insurance. Her writing has appeared in Forbes, Parachute by Mapquest, Capitalist Review, Guyvorce, BonBon Break and Kard Talk. Janet lives in Arizona with her husband and son and their rescue dog, Dexter. Outside of work and family time, she enjoys cooking, reading historical fiction and binge-watching Real Housewives.
Medical Mileage Deduction: What is it and what does the IRS allow?
Home → add trip → Medical Mileage Deduction: What is it and what does the IRS allow?
You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care.
- Bus, taxi, train, or plane fares or ambulance service,
- Transportation expenses of a parent who must go with a child who needs medical care,
- Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and
- Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment.
You can also include parking fees and tolls. You can add these fees and tolls to your medical expenses whether you use actual expenses or the standard mileage rate.
He figures the actual expenses first. He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630.
He then figures the standard mileage amount. He multiplies 2,800 miles by 23 cents a mile for a total of $644. He then adds the $100 tolls and parking for a total of $744.
Bill includes the $744 of car expenses with his other medical expenses for the year because the $744 is more than the $630 he figured using actual expenses.
- Going to and from work, even if your condition requires an unusual means of transportation.
- Travel for purely personal reasons to another city for an operation or other medical care.
- Travel that is merely for the general improvement of one’s health.
- The costs of operating a specially equipped car for other than medical reasons.
You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. You may be able to include up to $50 for each night for each person. You can include lodging for a person traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Meals are not included. See Lodging , earlier.
You cannot include in medical expenses a trip or vacation taken merely for a change in environment, improvement of morale, or general improvement of health, even if the trip is made on the advice of a doctor. However, see Medical Conferences , earlier.
One Very Important Deduction You Could be Missing on Your Taxes
This post is sponsored by MileIQ, however, all opinions and miles driven to Starbucks are 100% mine.
If you haven't been tracking your mileage, you could be missing out on some BIG tax deductions at the end of the year. Yes, you!!
Mileage deductions are typically thought of as a business-only benefit, but they're available to everyone depending on what you do or where you go. You just need to do two things….
- Know the rules for each deduction.
- Keep extremely detailed records for every trip you take.
Sounds like more hassle than they're actually worth, right?
Well, that's certainly what I used to think. Both Joseph and I have had plenty of opportunities to track mileage with all of our eligible business and personal trips….and believe me, it's not that we haven't tried.
We've kept notebooks in the car, cute little printables at home, and spreadsheets on Google Drive, but it finally became such a hassle to remember to record our mileage, that we basically shrugged it off and said it wasn't worth doing. Tracking mileage was basically one more thing to keep tabs on our already jam-packed to-do list.
Until our CPA gently reminded us how much we were missing out.
Now that I've realized what kind of impact mileage deductions have on our overall taxes, I'm done losing out on money I can legally write off. I don't want you to keep missing out either!
This in-depth post break downs exactly how the mileage deduction works, what you can deduct and for how much, and by far, the best app I've found to easily keep track of everything. My goal is to make this complicated portion of the tax code is an absolute no-brainer so you can stop paying the government any more than you have to.
Ready to get started?
If you're not familiar with how deductions actually work Adding mileage to your list of deductions pushes that taxable number even lower so you owe less. Basically, the more you claim, the more you save! Let's dig into the nitty gritty detail of what's covered, and what's not. Note: These are 2016 standard mileage rate numbers I'm using.
Adding mileage to your list of deductions pushes that taxable number even lower so you owe less. Basically, the more you claim, the more you save!
Let's dig into the nitty gritty detail of what's covered, and what's not. Note: These are 2016 standard mileage rate numbers I'm using.
Let's bring back that $60,000 number and say that's what you made for the year. If your medical expenses are $5,000 , you can't deduct anything. But if expenses are $7,000, you get to deduct $1,000. Make sense?
- Charitable Expenses — If you drive to and from a non-profit as part of a volunteer activity, you get to deduct $.14 per mile. It's not much, but every little bit counts! FYI: You cannot claim this for driving a child to a volunteer activity…..just the adults.
- Moving Expenses — If you're relocating for work at least 50 miles away or more, you can deduct $.19 per mile. However, you do have to work full-time for at least 39 weeks during the first 12 months after you move to claim it.
- Freelance Expenses — Those that babysit, petsit, do lawn care, or participate in some sort of other odd job, get to deduct all of the drives to and from those locations. And the deduction rate is $.54 per mile!
Those who own their own business get to also take advantage of the $.54 per mile rate, and it covers quite a bit.
- Errands and Supplies — Any time you need to run to the bank, office supply store, or post office, you can write those drives off. All those little trips really add up!
- Meals — Have a meeting with a friend or business partner to discuss business? Write off your trip for coffee, drinks, and/or dinner.
- Travel — Drives to and from the airport, or to another place of business qualify too.
- Customer Visits — If you have a job that requires you to meet with customers, you know what to do…..write it off!
Heads up — commuting from home to a permanent work location is not deductible in any way. It's considered a personal expense and the IRS is very strict about this — so don't test it! You can find more details on that HERE, plus how to handle mileage driven to a temporary work location .
As I've said before, mileage deductions can be a pretty huge boost during tax time, but the truth is, most mileage records are not adequate enough, and therefore denied by the IRS. Remember, they have to be extremely detailed! The best app I've found that satisfies these strict requirements is MileIQ.
MileIQ is basically a tracking app that runs in the background on your smartphone. It automatically registers every drive, and when you're done with each trip, you just classify that drive as business or personal, and file it under the category it belongs with one swipe.
Now I know what you're thinking…..what if you don't want MileIQ to track every drive? Not all drives are going to be deductible, but the point of this app is that it tracks every drive so you never forget.
MileIQ highly recommends that you keep track of all your driving so you have complete records to show the IRS. Because when it comes right down to it, the IRS wants to know how many miles you drove during the year, and actually requires this detailed information when you file your taxes.
Although I've already submitted all my tax info for 2015, I'm super excited to track all my miles this year and see the major impact this has on our 2016 taxes. The best part? No time consuming mileage logs or spreadsheets to deal with!
MileIQ increases mobile productivity for the modern workforce, and is committed to saving you time, money, and peace of mind through their streamlined mileage tracking app. Learn more about MileIQ HERE.
Disclosure: Some of the links in the post above are affiliate links. This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. Read my full disclosure policy here.
Mileage Tax Deduction: Claim the Mileage Tax Deduction or Take the Standard Deduction?
Should you claim the mileage tax deduction or would you better benefit from taking the standard deductions?
Are you wondering if you can even deduct travel expenses related to your employment?
You may deduct certain ordinary and necessary transportation expenses; however, the miles that you drive to and from work are generally not deductible.
There are special instances in which they may be deductible.
The following example is an instance when you can deduct transportation expenses based on the location of your work and your home:
Example: You regularly work in an office in the city where you live. Your employer sends you to a 1-week training session at a different office in the same city. You travel directly from your home to the training location and return each day. You can deduct the cost of your daily round-trip transportation between your home and the training location.
In order to then claim these expenses, you will need to do some organizing and planning of your deductions to see if claiming these expenses would be beneficial to your tax situation.
You must assess whether you have enough itemized deductions to exceed the standard deduction for your filing status.
Itemized deductions may include:
- Medical and dental expenses (in excess of 7.5% of your Adjusted Gross Income)
- State and local income taxes
- Home mortgage interest, qualified mortgage insurance premiums, and real estate taxes
- Charitable contributions
- Unreimbursed employee expenses, tax preparation fees, and other miscellaneous deductions (in excess of 2% of your Adjusted Gross Income)
The 2012 standard deduction amounts are:
- Single and Married Filing Separate – $5,950
- Head of Household – $8,700
- Married Filing Joint and Qualifying Widow(er) – $11,900
Do your itemized deductions exceed the standard deduction?
If you determine your itemized deductions will not exceed the standard deduction, then claiming these expenses will not benefit your tax situation.
On the other hand, if you determine your itemized deductions may exceed the standard deduction, then you will want to keep track of the expenses incurred with your travels.
Unreimbursed Employee Expenses are subject to a 2% limit that also applies to certain other miscellaneous deductions.
The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of the adjusted gross income on the return.
Needed documentation for claiming unreimbursed employee expenses
Lastly, keep in mind, that if you do assess that you may be able to deduct these expenses, there is certain documentation you must keep with your tax records to substantiate your claims (Note: This information does not need to be submitted with the return).
Adequate records for mileage should contain the date you started using the vehicle, the date of the expense, the mileage for each use, the total miles for the year, your business destination, and the purpose for the expense.
Do you think you may be able to claim your mileage for training, or will you benefit from taking the standard deduction?
The Standard Mileage Deduction for Small Business Owners: How it Works
The Standard Mileage Deduction…
Taxes… Love them or hate them, they are necessary.
The wise entrepreneur uses everything in their power to discover any, and all deductions to legally reduce their taxes as much as possible.
Personally, I moved here to Puerto Rico partially as an advantage on my taxes.
As a citizen of this commonwealth, we do not have to pay Federal taxes.
But, I do understand a lot about taxes and how to save as much as possible on them.
No, I am not a Certified Public Accountant or bookkeeper, but my father was an accountant before retirement and I learned a lot of wise material from him.
But as a disclaimer, please do not take everything I write here as being completely accurate.
Be wise and seek counsel of a Certified Public Accountant before doing your taxes so you know you are completely in compliance. (I would feel extremely terrible if you were in trouble because of my article)
Be sure and get the mileage deduction for small businesses.
Courtesy of Pixabay
As a business owner, you need to find every tax deduction you can to help you take some of the burden off you when it is time to do your taxes.
We have often spoke about tax deductions.
In today’s post, we are going to look at a tax deduction that you should be taking if you are using your vehicle even slightly for business matters.
We will examine the standard mileage deduction for small business owners, and how it works.
In taking a tax deduction on your vehicle and the amount you drive for business, you have a choice to make.
- Take an actual expense deduction
- Take the standard mileage deduction
The key with both of these is you have to log all your mileage and the mileage used for business matters.
In the actual expense deduction, you can deduct:
- gas and oil changes
- maintenance and repairs
- parking fees and tolls
- registration fees and taxes
- the interest on a vehicle loan
To do all this, you will have to keep all receipts, and you add all your miles and your business miles and figure out the percentage of business miles you used the car for.
You would then add all the above expenses and multiply it by the percentage you figured out.
I am going to give you a simple example:
Let’s say Jim has a 2000 car so there is no depreciation and no loan payments.
Gas, oil changes and other similar items came to $4,900 for the year. Fees and taxes came to $800 and insurance $600. So the total expenses were $6,300.
Jim drove a total of 14,000 miles and he drove 9,300 miles on business.
9300 divided by 14000 = 66.4%
$6,300 X 66.4% = $4,183.20
That would be the amount Jim could deduct using actual expenses.
Would he be better off using the standard mileage deduction?
Other posts you should read:
The IRS made this really quite simple.
They have set a certain amount for each mile driven, but it is important that you know that amount because if you use the 2016 amount, you will be wrong.
In 2016, the rate was 54 cents per mile; in 2017, that rate has been lowered to 53.5 cents per mile.
So let’s look at Jim’s mileage and which deduction he would be better off taking.
Jim can still only deduct the business mileage which is 9,300 miles.
So 9,300 x 53.5 cents = $4975.50
So as you can see, Jim would be better off just using the standard mileage deduction.
It does seem the IRS has set the rates high enough so the standard mileage deduction is the most common form used.
Here is where many business owners slip up.
You must keep records of every business trip.
Keep in mind that if on the way back home on your business trip, you decide to stop at a store to pick up some groceries for home, the business trip ends at that point and it becomes personal.
Normally, the rates the IRS sets are the same throughout the year, but there is the possibility they may change that rate because of gas price fluctuations.
You will want to keep abreast of these changes.
Even better, if you use an accountant, they should be well aware of any IRS changes.
As a small business owner, you have so much on your plate.
Keeping logs on mileage can add a lot of pressure, but it is worth it.
If you can deduct $3,000, $4,000 or more off your tax bill, you will surely be glad you kept those logs.
But there is an application that can make the whole process much easier.
It is called Mile IQ and by having the app on your phone, it will add the miles and you just tell the app if it is business or pleasure.
I highly recommend that you get Mile IQ… You can do so here.
Deductions can vary depending who, or how the vehicle is owned.
If you as the business owner are the owner of the vehicle, you can follow the above system.
If the vehicle is under a C or an S Corporation, you will want to consult your accountant on how the deduction should be claimed.
If you are under an LLC, it works the same as an S or C Corporation; talk with your accountant.
As you can plainly see, this is one tax deduction that you should not neglect taking.
But, it does require maintaining accurate records.
Personally, I totally believe in the application I provided above, but I would also keep a log book so you have double proof.
Or, if the app has a glitch, you still have your written records.
Keep all receipts no matter how large or small.
This deduction can make a huge difference in the amount of taxes you have to pay at year’s end.
What are your thoughts?
Do you have any added advice?
You can post your comments and questions below.
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Please share this post with all your team members and social friends.
It could help them save on taxes too.
Greg Boudonck is a freelance writer and the author of over 50 books. He writes on many different topics, but business subjects are one of his primary areas of writing expertise. See Greg’s biography here.