Making the Most of the Mileage Tax Deduction according to Realtimecampaign.com
Rising gas prices have led to many individuals trying to reduce the number of miles they drive each day. For many, however, cutting back on their miles serves as a challenge. They must drive as part of their employment duties, regardless of how much gas costs.
Independent contractors and those who are self-employed often fall into this category, along with other individuals. Fortunately, these men and women can deduct certain expenses related to the travel, if the travel is for business, medical, charitable, or moving purposes.
Drivers may choose between two methods when calculating mileage, and this serves as only one deduction a person may take if they use their vehicle for work or charitable purposes. For example, a person might ask, “Is car loan interest tax deductible?”
The Standard Mileage Rate
Men and women who wish to take this deduction need to learn the current standard mileage rate. The IRS determines this rate each fall, and in some years the rate increases. This isn’t always the case, however. Some years it drops. How does the agency calculate this rate?
According to Realtimecampaign.com, when calculating the standard mileage rate for a year, the IRS may conduct an annual study focused on the costs associated with operating a vehicle. This study may consider both fixed and variable costs. Anyone wishing for more information on additional deductions may click to read this article.
Methods of Calculation
Individuals may choose to take the standard mileage deduction or calculate their actual vehicle expenses for tax purposes. Using the standard mileage deduction, the driver keeps a log of the number of miles they drive for work, medical, charitable, or moving purposes. They then multiply the number of miles by the IRS-established rate for the year. For those who choose to deduct their actual vehicle expenses, they must keep receipts and relevant documentation related to their driving expenses.
Keeping Records
Drivers need to keep records of their vehicle usage for tax purposes when using the second method. They must document any costs related to operating the vehicle. This includes gas and oil they put into the vehicle, repairs, tires, and more. The driver may also include insurance, licenses, fees, and more when documenting the business use of the vehicle. Once they document all expenses, the owner adds them up and determines what percentage they used the vehicle for business. They multiply the total expenses by the percentage used for business and deduct the resulting figure from their taxes.
Many people find this method overly complicated. They choose to use the standard deduction. Technology makes it easy to do so, and countless individuals may choose to use something like MileIQ to record the miles they drive for business, charitable purposes, medical reasons, or moving. When doing so, the driver needs to document the reason for the trip, the date and time, and the number of miles driven.
People need to ensure they take every deduction on their taxes. With the help of technology, doing so has never been easier. Begin tracking miles today and see how it saves money.
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