Another week, another tax-themed post. Many of you have filed or soon will file your income tax returns for 2015. Did you know that your business mileage is a tax deductible expense? Now keep in mind that the IRS considers commuting a personal expense. But if you work several jobs (e.g. moonlighting) or your primary job has several locations you have to travel between, keep reading on how you can save some moolah...
What kind of travel qualifies as business miles?
- Travel between offices - For example, between one hospital and another.
- Errands/supplies - driving to the post office, the bank etc for work related tasks.
- Business events - driving to client dinners, marketing meetings, medical conferences etc.
- To and from the airport - if you are traveling for business.
- Parking/Tolls - when you're traveling for business. For example, parking at the airport when you're flying to another city for a medical conference.
- Odd jobs/Temporary jobs - mileage driven to moonlighting locations or other side gigs.
- Job hunting - mileage driven while looking for a job.
- IMPORTANT!!! Commuting to and from your principal work location does NOT count as a qualified expense.
How can you deduct business miles?
The IRS allows 2 ways for you to deduct business mileage:
- Actual expense paid for operating your vehicle - keep all receipts for gas, maintenance, repairs etc and only deduct the portions driven for business. This method requires more work on your part since you have to keep a meticulous record in case you get audited by the IRS.
- Standard mileage deduction - the IRS sets the per mile rate for standard mileage deduction every year. For 2016 it is $0.54/mile ($0.575/mile in 2015). This is much easier to manage as you will see below. This is how I personally track my business mileage.
How do YOU Track business miles?
There are many ways to track your business miles. Something old school like pen and paper or an excel spreadsheet will do just fine. But since we live in the 21st century, there are much easier ways to track your business mileage - you guessed it! There's an app for that. In fact, there are a TON of apps that help you track your miles automatically. I have personally tried 2 (Hurdlr and Sherpashare) and they both work well. I settled on Sherpashare because of some battery drain issues with Hurdlr. Both apps are designed to automatically detect when you are driving and start recording your miles based on GPS data. At the end of each drive you will be prompted to categorize the trip as either business or personal. All mileage will be logged and automatically backed up to the cloud.
Unless you believe that you have nothing better to do with your money than to give it to Uncle Sam, you should take advantage of the business mileage tax deduction. It may save you hundreds of dollars a year. Most tax software will automatically ask you for any business travel to make sure you get the biggest refund. But even if you don't use software, you should still check out IRS Publication 17 to make sure you are taking advantage of this great deduction.