The IRS says that to deduct your mileage as a business expense on your tax return you must keep a record of your business trips during the year and the total miles your drive. This is often used for the mileage deduction for business use of a personal car. But, what happens if you use your business car only for work purposes? Do you still need a mileage log?
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The mileage deduction is one of the largest tax savings you can get if you use a personal car for business purposes. But, there are various vehicle-related deductions for the self-employed. Let’s go over the parking deduction and see how it can impact your tax bill.
The mileage deduction is a great way to save on your tax bill. But there are some misconceptions about this valuable deduction. Let’s go over some facts and myths about the mileage deduction.
Myth: You Need An Odometer Reading for Every Trip
The IRS Mileage Rate 2017 is important for those looking to take a driving-related deduction. The IRS hasn’t announced the mileage rate for 2017 yet, but it can have a major impact on your taxes. While the business mileage rate gets most of the attention, you can also write off miles for charity, medical or moving purposes.
The Internal Revenue Service issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, medical, charitable or moving purposes.
Beginning on January 1, 2014, the standard mileage rates for the use of a car (also pickups, vans, or panel trucks) will be:
• 56 cents per mile for business miles driven
• 23.5 cents per mile driven for medical or moving purposes Read more
The rules regarding deductions for federal income tax purposes related to business use of a personal vehicle are often some of the most misunderstood rules in the world of taxes. Generally, the costs of commuting from a taxpayer’s home to their regular place of work are nondeductible personal expenses. What “commuting” expenses then are considered deductible?
Commuting expenses are deductible when going between a taxpayer’s home and work location if:
- The expense is for going between the taxpayer’s home and a temporary work location outside the metropolitan area where the taxpayer lives and normally works.
- The taxpayer has one or more regular work locations away from home and the expenses are for going between home and a temporary work location in the same trade or business, regardless of distance, or
- The taxpayer’s home is the taxpayer’s principal place of business, and the expenses are for going between home and another work location in the same trade or business, regardless of whether the other work location is regular or temporary and regardless of the distance.
A work location is considered temporary if employment is expected to last and actually does last for one year or less.
To determine whether the home is the taxpayer’s principal place of business, consider the following:
- The relative importance of the activities performed at each place where the taxpayer conducts business and
- The amount of time spent at each place where business is conducted.
A home office qualifies as the principal place of business if the taxpayer:
- Uses it exclusively and regularly for administrative or management activities of his trade or business.
- Has no other fixed location where substantial administrative or management activities for the trade or business are conducted.
The amount of the deductible mileage expense can be calculated using either actual expenses or the standard mileage rate. For 2013, the standard mileage rate is 56.5 cents/mile. Note that a taxpayer may convert from the standard mileage rate to the actual cost method any year. However, if the actual cost method was used in the first year the vehicle was used for business, a taxpayer cannot convert to the standard mileage rate method in a later year. Mileage logs should be maintained to document the total miles driven for the year, the total business miles driven for the year, the date the vehicle was placed in service, and the basis of the automobile (if actual cost method is used).
In summary, commuting from home to a regular or main job is never deductible. Commuting to a temporary work location or a second job from a regular or main job is always deductible. Commuting to and/or from a temporary work location and/or a second job is always deductible. Commuting from home to a temporary work location is deductible if you have a regular or main job at another location. Commuting from home to a second job is never deductible; you must have gone to the regular or main job first.
If you would like more information on how you can convert your nondeductible mileage and other expenses such as rental costs of your residence, to tax saving deductible expenses, fell free to contact me.
IRS Circular 230 Disclosure: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.