Because of recent increases in gas rates, the amount you can deduct for business use of your car per mile will increase from 51 cents per mile, which it was from January 1, 2011 through June 30, to 55.5 cents per mile starting July 1, 2011 through the end of the year. This is why it is important to keep a daily mileage log on your driving for business use. This is a relatively simple habit to get into and it makes your paperwork at tax time so much easier.
How do I keep a mileage log?
For a mileage log, simply put a notebook in your vehicle. Keep columns for date, odometer reading to start the day and end the day of business driving. Keep a total mileage column also which you can use to add it all up at the end of the year. This also allows for when the IRS allows different amounts for different times of the year. It is nice for keeping track of the total mileage on the car which the IRS also wants to know.
What mileage counts?
The easiest way I can explain it is any mileage that you are driving for your business that is not reimbursed or driven in a company provided vehicle. However, remember that commuting is NOT deductible mileage. If you live in Canton and drive to Akron, that is commuting and not deductible. If you then drive from Akron to the Youngstown office every day and back, this mileage IS deductible. Another common example is someone who is a visiting nurse. A wise nurse will, if possible schedule her 2 nearest visits (if she doesn't report to an office first and at the end of the day) first and last for the day. This is because the drive from her home to the first location is considered commuting mileage while the driving to all of the stops during the day are business miles. Then when she makes her last visit and drives home, that mileage is commuting and not deductible.
What about insurance and repairs, can't I claim those?
Yes, in certain circumstances you can claim insurance and repairs INSTEAD of mileage. Most preparers and taxpayers that have done the math have generally found that it is easier to prove and they generally get more deduction by claiming mileage. Assuming even $4 per gallon, your per mile cost for gas is 16 cents. Taking this out of the equation, that leaves 39.5 cents per mile to cover insurance and repairs. For every 1,000 miles, this leaves $395 of deduction to compare against all of the other costs such as repairs, tires and insurance. Assuming $600 for insurance, repairs of $2,000 and $500 for a new set of tires EVERY year, this comes to $3,100 of what most people could claim. This would come to 7,800 miles to cover those expenses. While there are years that you may make out on that, you are not permitted to switch back and forth on the methods of deducting your vehicle. If your vehicle requires that much cost every year, you should think about a different vehicle.
By the way, mileage for business use is different than mileage for charity which is 14 cents a mile and mileage for medical treatment or moving which is going up to 23.5 cents per mile starting July 1st from 19 cents per mile.
Thursday, June 23, 2011
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