mileage deductions

Mileage Deductions: Can & Can’ts

Mileage Deductions, What Is & What Isn’t Allowed?

There are few things in life more stressful than preparing for the upcoming business tax filing period.  There are so many things to consider, how much can I deduct for my office space, is my car a deduction and even more complicated, what mileage can I deduct.

When considering mileage deductions it is important to remember that the IRS requires precise documentation as to the actual miles you are deducting.  There are a few important rules to be aware of before you just jot down your odometer readings.

Mileage Deductions Guidelines

When determining your deductible mileage allowance, it is important to remember that there is a distinction between your family home and your tax home.  Generally, your Tax Home  (see IRS Publication 463) is where you earn your income or your place of business.  This definition has many qualifications of which we won’t be delving into in this article.  Suffice it to say that your “Family Home” is your dwelling place with your family and your “Tax Home” is your place of business, whether it be an external office, a home office or even your automobile in the case of traveling employees.  With that being said, the mileage from your Family Home to your Tax Home is nondeductible as it is considered normal commuting mileage.

Standard Mileage Rate

You generally can use the standard mileage rate regardless of any reimbursements you may have received regarding your vehicle.  However, If you choose this deduction method, you must choose to use it in the first year your car is available for use in your business.  In later years, you can choose between the standard mileage rate or actual expenses.

Leased Vehicles

A leased vehicle is slightly different.  If you elect the standard mileage rate, you must use it for the entire lease period. You must make this election before your tax return due date (or extension date) and unfortunately, the choice is non revocable.

You generally can use the standard mileage rate regardless of any reimbursements you may have received regarding your vehicle.  However, If you choose this deduction method, you must choose to use it in the first year your car is available for use in your business.  In later years, you can choose between the standard mileage rate or actual expenses.

Leased Vehicles

A leased vehicle is slightly different.  If you elect the standard mileage rate, you must use it for the entire lease period. You must make this election before your tax return due date (or extension date) and unfortunately, the choice is non revocable.

Mileage deductions

Let’s Look At An Example:

Meet Larry,

Larry is an employee of the law firm of Larry, Curly, Moe & Associates.  His job occasionally requires him to travel to various locations within his home state of Wisconsin.  Unfortunately, he doesn’t have the luxury of a company vehicle, so he uses his own car; a new Fraud Blurry, which he purchased in 2014.

It has now been over two years, and Larry just found out that he could deduct his mileage for his business trips but he didn’t elect to do so for 2014 or for 2015.  Technically, he is now ineligible to do so in 2017.  However, there are always extenuating circumstances, and Larry promptly set an appointment to see the CPAs at Advanced Tax Solutions.  Good Luck Larry.

You Can’t Use The Standard Mileage Rate If:

mileage deducttions
If you use five or more cars at the same time (such as in fleet operations)
mileage deducttions
If you claimed a depreciation deduction for the car using any method other than straight line
mileage deducttions
If you claimed a section 179 deduction on the vehicle.
mileage deducttions
If you claimed the special depreciation allowance on the car
mileage deducttions
If you claimed actual car expenses after 1997 for a car you leased or are a rural mail carrier who received a qualified reimbursement

Actual Vehicle Expenses

If you don’t use the standard mileage rate, you may be able to deduct your actual car expenses. If you qualify to use both methods, you may want to take advantage or our free half hour consultation and we can help you find out which way would be more advantageous for you and yield the larger deduction.

What Are Legitimate Actual Vehicle Expenses?

Good Question.  Generally they include:

Depreciation Licenses Lease
payments Registration fees
Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees

A Few Final Things To Consider

mileage deductionsQualified nonpersonal use vehicles – These are vehicles that by their nature aren’t likely to be used more than a minimal amount for personal purposes. They include trucks and vans that have been specially modified so that they aren’t likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company’s name. Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles.
mileage deductionsMore than 50% business use requirement – You must use the property more than 50% for business to claim any section 179 deduction. If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. The result is the cost of the property that can qualify for the section 179 deduction.

There is so much more to know with regards to mileage deductions and business deductions that it might just be worth your time to talk to a professional.  Schedule a free half hour consultation with one of our Certified Public Accounts today.  We can help you make sense of the convoluted world that is the IRS.  Hopefully you have gained some insights into mileage deductions that have been helpful.  If you have enjoyed this article, we encourage you to like it and share it with your friends.

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