It’s time for resolutions about losing weight, being better organized or taking that trip you’ve always wanted to take—why not resolve to save money on taxes in the new year, starting with your mileage? Here are five mileage tips to maximize your 2017 mileage deduction.
Start Tracking Mileage
This one is obviously a no-brainer coming from MileIQ, but you’d be shocked how many people still “estimate” their mileage logs at tax time or just don’t bother with mileage tracking at all.
Frankly, a lot of people simply think the mileage deduction is so small that it’s not worth the hassle of keeping a detailed and accurate mileage log. But, with the 2017 mileage rate set at 53.5 cents per mile, this deduction ends up meaning serious money at the end of the year. In fact, the average MileIQ user deducts over $6,900.
Get a Home Office
Just like the mileage deduction, the home office deduction is incredibly valuable. Not only can you deduct a portion of your rent or mortgage payments for the space in your home that you dedicate towards your home office, but it can also help you dramatically increase your mileage write-offs.
As you probably know by now, you can never deduct your commute to and from work. This means that you can’t deduct your drive to and from your principal office. If you don’t have a regular office, you cannot deduct your drive from home to your first business event or from your last appointment to home.
However, one way to avoid the commuting rule is to have a home office that qualifies as your principal place of business. In this event, you can take a deduction for any business drives you make from your home office. The commuting rule doesn’t apply if you work at home because, with a home office, you never commute to work since you’re there already.
Track Every Single Drive
The unfortunate truth is that many people only bother to log their longer drives. There are a number of reasons for this, but usually, it boils down to deciding that a mileage log is way too much work for every single drive. However, this a fatal mistake that can prove costly—both from missed deductions and the possibility of steep fines and penalties from the IRS if you’re ever audited.
The IRS requires your mileage log to be contemporaneous, meaning kept in real-time. A mileage log must keep track of every business drive and include the date, the start and end location and the business purpose of each drive. But that’s not all. The IRS also requires you to keep track of all of your commuting miles, as well as all of your “other” miles, such as personal driving. Failure to keep a log that holds up to IRS scrutiny can not only cost you your entire mileage deduction, but can also cause you to incur fines and penalties from the IRS.
If that weren’t enough reason to track every single drive, here’s another one: Your frequent, small drives probably add up to a lot more money in tax deductions than your longer ones. If you’re already using MileIQ, I’m sure you can attest to this first-hand.
But if you’re not already using MileIQ and have been tracking with pen and paper, take a look at your past logs. Did you document all of your drives to buy office supplies? How about the post office? The hardware store? To Starbucks for a client meeting?
I’m willing to bet you’re forgetting to track at least some of those shorter drives and 53.5 cents per mile adds up quickly. Think about it another way: if you drive to a business errand that is one mile away, that’s two miles roundtrip – and $1.08 tax deduction.
Keeping track of all of those short drives with pen and paper is time-consuming, but using an automatic solution like MileIQ can not only eliminate that hassle but also give you the peace of mind to know you’re logging every single drive.
Know What You Can Deduct
You know the old saying, “The only things certain in life are death and taxes,” but as a small business owner, there are a lot of ways to minimize the latter.
Take mileage and car expenses for example. You know you can deduct 53.5 cents per business mile in 2017. When you choose to use the standard mileage rate versus actual expense method, you can’t expense the cost of gas, oil changes, depreciation, etc … However, there are a number of driving-related deductions you can take in addition to the mileage.
For example, don’t forget you can deduct parking fees and tolls, so be sure to make a note every time you pay to park or pay a toll on a business related trip. If you’re using MileIQ, there is a form built into every drive card for you to add that information.
In most cases, you can also deduct the price you pay for software and tools such as MileIQ’s subscription price as business expenses. Other overlooked deductions include equipment, tools, certain meal and travel expenses and more. Frankly, there are so many deductions for self-employed professionals and small business owners that you’ll be doing yourself a huge favor —and potentially saving a lot of money—by meeting with a tax professional early on.
Deduct Medical, Charity and Moving Mileage
While not quite as lucrative as business mileage, you are also able to deduct the miles you drive for medical purposes, such as to and from the doctor’s office, as well as the miles you drive in the service of an eligible charity or for certain moving-related drives. The standard rate for medical related driving and tax deductible moving will be 17 cents per mile in 2017. The standard rate for charity related driving stays at 14 cents per mile—this rate is fixed by law and is not adjusted from year-to-year.
If you’re already using MileIQ, you can easily designate a drive for medical, charity or moving when you classify a drive as personal.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.