It’s very important for construction workers to track mileage because it can lead to a major deduction at tax time.
What can construction workers deduct on taxes?
Work expenses for tools, mileage and equipment quickly add up. Many employees are not compensated by an employer for these items. These expenses can be deducted on your federal taxes, which can reduce your year-end tax liability.
For construction workers, mileage can really add up. When you track mileage, it could be your biggest tax deduction. Here are some tips to maximize your mileage expenses.
Who can deduct mileage?
Employees can only take a mileage deduction if a personal vehicle is used for business purposes. Additionally, your employer cannot reimburse you for using a personal vehicle.
Independent contractors can deduct mileage when:
- Driving to temporary job sites
- Meeting clients
- Traveling between work locations
- Buying tools and materials.
Actual cost accounting method
The IRS has two methods for calculating the cost of using your vehicle for business. The first method, Actual Cost, includes calculating every expense you spend on your vehicle. Insurance, gas, repairs and more must be recorded. You must keep all receipts and add them up at the end of the year.
If your vehicle is used for both business and personal reasons, you must calculate the business use percentage. Multiply the business use percentage by the total amount of the actual costs. That is your deduction. This method is good when you have a large repair during the year.
What’s the standard mileage rate?
The other method is to take the standard mileage rate. For 2019 tax year, the rate is 58 cents per mile.
You track mileage throughout the year. To determine your tax deduction, multiply the business miles by the annual rate. You cannot deduct any operating expenses when you use this method. Insurance, gas and repairs are already calculated into the rate.
Tips for tracking mileage
The IRS has certain requirements for tracking mileage to take the deduction. You should log your:
- Total mileage for the year
- The places you drove for business
- Dates of each drive
- Business reason for each trip.
What is the best method for mileage tracking?
The IRS does not have a specific method of tracking miles. Some people manually track miles through an Excel spreadsheet or use hard copy logbooks. Technology is making recordkeeping much easier. A mileage-tracking app, such as MileIQ, can save you time and money while reducing your stress from manual tracking.
Maximizing your deduction
Fifty-three-point-five cents per mile doesn’t seem like a lot. Those miles quickly add up. Driving 100 miles per week, fifty weeks per year adds up to a deduction of $2675 on your federal taxes. Most construction workers will drive much more than that. The most difficult part of taking a mileage deduction is tracking the miles. Technology is making it much easier and simpler.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.