Using a mileage deduction can be important if you use your personal vehicle for business. Every year, you’ll find that the mileage deduction changes.
Things included in this deduction and how much it is each year include gas prices, wear-and-tear, and several other factors.
To claim this tax deduction, you need to make sure you have not only a mileage log but one that’s considered compliant.
The IRS mileage deduction rates for business use as of January 1, 2019, are:
- Starting in 2019, the standard mileage rate is 58 cents a mile. This is an increase of 3.5 cents from the 2018 rate.
- Twenty cents per mile, for either moving or medical-related driving.
- Fourteen cents a mile, when driving is for nonprofit work or volunteer work done for a charity organization.
The following are some of the main things you need to know about this tax deduction and keeping your mileage log.
In the past, an employee could deduct their mileage, but something important to know is that’s no longer allowed.
Under the Tax Cuts and Jobs Act of 2017, the option to take itemized deductions for expenses not reimbursed, including mileage, were eliminated.
Under that relatively new tax law, it also reduced the deduction for moving expenses. That’s now only available to active-duty members of the military who are moving because of new orders.
The new tax code says you can take the deduction if you’re self-employed, or you have mileage related to going to medical appointments.
Another option available is deducting the mileage you incur because you’re volunteering for a non-profit organization.
Mileage and the Self-Employed
Self-employed people get the most benefits under the new tax law when it comes to mileage and the available deductions.
They also have the fewest restrictions, and when you’re self-employed, you can include miles where you’re running errands for work-related supplies, going to meetings or going to other work sites.
All miles are deductible, no matter how much you’re driving for work although you can only deduct business miles.
When you’re self-employed, you can claim your deduction on your Schedule C form instead of the A which is used for itemized deductions.
You can also compare whether it’s better to claim actual expenses or do the standard deduction.
IF you’re driving to see your doctor, to the hospital or the pharmacy, you can take a medical deduction. In 2018, the rate was 20 cents per mile driven.
However, there are limitations. Like you cannot deduct anything apart from medical expenses, including mileage and other bills that are more than 7.5% of your adjusted gross income. This threshold has gone up to 10% this year.
Actual Vehicle Expenses
Some of the things you can deduct in addition to standard mileage (if you can prove they’re business expenses) include:
- Interest on auto loans
- Interest on property tax fees
- Parking fees tires
- Maintenance and repairs
Keeping Up with Your Mileage Log
If you don’t keep up with your mileage log, you shouldn’t try to take a deduction. It can create serious trouble.
There are certain errors that people tend to make frequently. One is not including their business purpose in their log, and another is using estimates rather than having the right kind of documentation.
One of the main reasons for mileage log audits is not keeping a log but then claiming 100% business use. If you claim your vehicle was used only for business, it’s going to be an immediate red flag in many cases.
You shouldn’t claim daily mileage between your home and work, although as a self-employed person you can claim your home office as your primary workplace and then deduct travel between your office at home and a secondary location.
Your total mileage claim needs to identically match your mileage log, and you shouldn’t round numbers up either. You need to keep it as accurate as you can, which is why people often used calculators to help them.
Keep your receipts in case you need to prove any issues and never try to create a log later on. If you have a mileage log that isn’t an exact record and you try to estimate after the fact, the IRS may spot it.
Finally, handwritten logs can be messy and hard to keep up with, so you might want to use an electronic tool.