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Writing Off Business Mileage: What You Need to Know

Via LinkedIn : It’s a confusing world out there if you want to write off your mileage. So whether you use the standard mileage rate deduction or actual expenses, here’s what you should know.

Should I write off actual expenses or use the standard mileage rate?

This is a decision that can only be made by using good old fashioned math skills. The general rule is this: if your vehicle is economical to operate, it’s more than likely that the standard mileage rate will bring you the greater deduction. Conversely, if you have higher operating costs, maintenance and repair costs, the actual cost method might benefit you more. So start by adding up your vehicle operating costs. Then compare the number to the standard mileage rate.

Remember if you start with standard mileage allowance the first year a vehicle is used, then you can switch back and forth each year, depending on which system gets you the largest deduction. If you start with actual expenses, you must use actual expenses for the life of that vehicle.

What is the standard mileage rate?

The standard mileage rate for 2014 business driving was 56 cents per mile. For 2015 it is 57.5 cents per mile. The IRS allows employees and self-employed individuals to use this rate for business mileage.

What counts towards the standard mileage rate deduction?

To determine the number of miles driven for business, you need two numbers for each business vehicle: the total number of miles driven during the year and the total number of miles driven just for business.

Tracking your total mileage can be tricky if you did not do it throughout the year. However, it’s not too late. Work backwards to your January 1 odometer reading. Check out your calendar. Use a program like Google Maps to count the number of business miles.

The record is supposed to be contemporaneous, though, so keep a calendar in the car and write the business mileage down and the purpose each time to avoid trouble.

Business miles are the number of miles actually driven for business, for example, to visit a customer or meet a client. But don’t forget about drives to office supply stores, drives to meet with your CPA or lawyer or other professional trips.

What doesn’t count towards the standard mileage rate deduction?

If you are wondering what is not considered business related, here are two general rules.

  1. Driving from your home to your workplace and back is commuting and is, therefore, not deductible on either your business or your individual return. The first outbound trip of the day is usually a commute, and the last one home is the return commute. If you have a home office, then the first trip of the day is deductible, as is the return home.
  2. If you stop at the store on the way home from a business trip, the remaining miles from the store to home are considered personal mileage, so you can’t include them.

What else can I claim if I choose to use the standard mileage rate deduction?

Here is a partial list of write-offs you may be able to claim:

  • interest on an auto loan
  • property tax fees
  • parking and tolls
  • rental or lease payments
  • garage rent

What if I have a home office?

If you don’t write off a home office, your first and last trips of the day are considered non-deductible commuting. For example, if you are a contractor who drives to different clients’ offices throughout a day, the first trip from home and the last drive back are not deductible, but the distance driven between each client can be written off.

What if I used actual expenses?

If you use actual expenses, add to the list above:

  • gas and oil
  • repairs and maintenance
  • insurance
  • tires
  • depreciation
  • registration

The key is to keep good notes and records as well as proof that your deductions are indeed business related expenses.

 

Katherine Gotthardt blogs for Myerson & Myerson, CPA’s and is CEO of All Things Writing, LLC. Contact Katherine for information on blogging and other writing services.

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