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2 Ways to Save Big Money Racking Up Business Miles in 2018


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4/30/2018
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2 Ways to Save Big Money Racking Up Business Miles in 2018

There are two ways to deduct your automotive expenses: (1) by standard mileage rate; or (2) by actual car expenses.

Standard Mileage: Under this method, you get 54.5 cents per mile driven.  This is up slightly from 2017.  This method is not available if you also depreciate your vehicle and must be chosen in lieu of actual lease payments.  There is IRS guidance that goes into great detail as to this election.  When choosing this method, depreciation and lease payments incurred are not used.

For most business taxpayers with a lease, the actual car expense method wins out.  If you have a $750/mo lease and drive 2,000 miles/mo, spending $400/mo on gas… you are spending about $1,000/mo.  On those figures you’d get credit for $13,080 per month on standard mileage.  But, you’d be spending $13,800 before factoring in maintenance, wear and tear, and repairs.  So, in this example, actual expenses would win the day.

Also good to know: You can get credit for other mileage expenses. If you have a loved one who is ill and suffering from a chronic disease, or you yourself have frequent medical visits, you can deduct mileage for these “medical purposes” at a rate of 18 cents per mile.  The same is true for mileage incurred during a move, although, unless it is a cross county trip, I don’t think you are going to save much on that one.

Another little-known mileage expense that is available to taxpayers is miles driven in service of charitable organizations.  Here, you get the least bang for your buck, with only a 14 cents per mile deduction.

Whereas the “business mileage deduction” you are relying on with “standard mileage” is meant to cover the cost of the vehicle and its upkeep, the medical, moving and charity deductions are meant more for the purpose of reimbursing gas costs, which are estimated to be in this range.  The cost of gas currently is hovering around 14 cents per mile.

Actual Car Expenses: With actual care expenses you have to determine the percentage of personal use versus business use for the vehicle and track the costs.

What about travel from my “Home Office” to my “Main Office”?  Can I deduct those miles as actual car expenses?  Yes, you can!  This gets tricky, but if you maintain a home office for your small business.  To take the deduction, your home office must either be: (1) your principal place of business; (2) the place you meet clients or customers; or (3) the separate structure test.

If the most important business you do is from the home office, you can claim it as your principal place of business.  It must be used exclusively and regularly for business purposes.  The other two tests are harder to meet.  Another option is to create an “Accountable Plan” to take expenses for reimbursement of employment-related expenses such that you can pay yourself back for the out-of-pocket expenses.

For all the employees out there, you have different options as well.  Does your employer have an accountable plan?  If so, you are in luck.  If not, another option is to itemize your deductions.



Category: Tax Law


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