January 23 2017
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.
Some believe you need to record your odometer reading for every business mileage trip. But that's not what the IRS requires. When you claim business mileage on taxes, you need total business mileage deduction, commuting and your personal mileage.
When claiming your deduction on IRS 1040 Schedule C, the IRS wants to know your total deduction amount. You'll also have to provide the following answers:
You'd be surprised at how many people tell their tax pros their mileage is the "same as last year." Or how many people will make an estimate on how much of their vehicle usage was for business.
The IRS doesn't allow estimates for the mileage deduction. There's no wiggle room or leeway. If you're ever audited and the IRS discovers your estimates, it can disallow the deduction and impose fees and penalties.
You don't need to submit your mileage log when you claim your deduction, but you do need this documentation to back up the claim. If you ever face an IRS audit, you'll be so thankful you have proof of your deduction.
According to the IRS, your mileage log for all business-related drives must include:
The majority of you will be deducting your business miles for a major break at tax time. But there are other ways to get money out of your miles. Remember: unless you have a qualifying home office, your commute is never deductible.
If you're keeping track of all your miles, you may also be able to save at tax time. If you drive for charitable, medical or moving purposes, your miles may lead to a tax deduction. You can read more about those deduction rates here.
The majority of people who take this deduction are self-employed or small business owners. But if you are a W-2 employee who uses a personal car for work, you might be entitled to a tax deduction, too. If you receive a mileage reimbursement that doesn't equal the standard mileage rate, you may claim a partial deduction.
This used to be true. Having to remember to log every mile was a tedious task. But thanks to mileage tracking apps like MileIQ, it's easier than ever to maintain a compliant mileage log.
The best thing about mileage logging programs like MileIQ is that it not only gets you the largest deduction you deserve but it gives you time back. Those valuable hours could be used to grow your business or to play with your kids or to do whatever you'd like.
To view the original article, visit the MileIQ blog.