Questions About Business Mileage Deductions

Business Mileage Deductions - FAQ's
Business Mileage Deductions - FAQ's. Hero Images/Getty Images

 CPA Gail Rosen answers some questions about deducting mileage expenses for business travel.

Are Commuting Miles Deductible?

Q:I was an independent contractor last year. I traveled to get my son, who worked on the job with me, though unpaid. Can I claim the mileage to pick him up from my house as a mileage expense? Further, when I drop him off after the job, can I claim the mileage back to my home too?

A: No, you can not claim mileage to pick up your son who works for you. Commuting expenses, which are expenses for traveling from your home to work, are not deductible.

Can I Deduct Travel Miles as Advertising?

Q:If I put my company's logo on my car, can I deduct my traveling miles as advertising?

A: No, a company logo on your car does not make it a business vehicle. You must keep a contemporaneous log of your business miles and total miles for the year.

Are Miles from a Home Based Business Deductible?

Q: If I work out of my home as an independent contractor, can I claim mileage to work sites and back home? Can I deduct trips made to the bank and post office? What if I make business-related trips from my home office and also stop to do personal errands? How do I figure the mileage?

A: Yes, your mileage to work sites and back are business miles that must be supported by written documentation of where you went and how many business miles you traveled.

Trips to the bank and post office also qualify as business mileage if documented. Trips for personal errands are ignored. The end result of your records should be business miles for the year (with a backup written log) and total miles driven for the year. To document your total miles driven, take your odometer reading at the beginning and end of the year.

The IRS often looks at the odometer reading on auto repair bills to see if your total miles are reasonable.

Which Should I Use - the Standard Deduction or Actual Expenses?

Q: How do I know whether to take the standard deduction or use actual expenses?

A: You should try both the standard mileage deduction and actual expense method to see which method gives you the largest deduction. The larger the deduction you are entitled, the more you save in taxes. Every time you reduce your taxable income by taking more auto expenses, you reduce your total federal taxes by 25% - 50% (plus applicable state taxes) so make sure you maximize the auto deduction by trying both methods. The total federal taxes of 25% - 50% are due to the fact that you pay federal tax, social security and medicare on any net profits. Your federal tax rate is anywhere between 10% and 35% under current tax laws. As an independent contractor, social security and medicare taxes are 15.3% (you have to pay both the employee and employer matching) unless you are over the social security limit of $106,800 for the year. Therefore, if one method of calculating the auto deduction equals $1,000 more in allowable deductions than the other method, you can save taxes of $250 (25%) to $500 (50%) depending on your tax bracket, plus state tax savings.

For the actual cost method, determine the business percentage of use based on business miles documented divided by total miles driven for the year. Apply that percentage to actual expenses of owning and operating the vehicle; including gasoline, oil, tire, maintenance and repairs, insurance, repairs, insurance, registration fees and licenses, car washes, lease payments or depreciation if you own the car. Luxury limits are applied to lease payments and depreciation of the vehicle if the car has unloaded gross vehicle weight of 6,000 pounds or less.

Are Estimates Acceptable?

Q: I drove about 8,000 miles last year for my home business. I have some receipts, but I didn't log all the miles. Is an estimate OK? Can I still take the deduction if I don't have all the supporting information?

A: No, estimated business miles are not allowed to support your tax deduction.

The tax court disallowed the auto expenses in 2009 for the owner of a real estate brokerage firm and her employee in Engle v. Commissioner. The taxpayer admitted that their reported mileage amounts were estimates. In a summary opinion, they held that due to lack of substantiation the taxpayers were not entitled to the auto deduction.

Can I Deduct Mileage for a Non-company Car?

Q: I am using my mother's car for my business driving. I pay the gas, maintenance, and the insurance. Can I deduct the use of the car as a business expense?

A: You can deduct the actual expenses that you pay and as long as you keep contemporaneous records for these expenses. You must have proof that you pay the gas, maintenance, and insurance and you need substantial records to support your business use. Make sure that you take out your personal use and your mom’s personal use.

More frequently asked questions about Business Mileage

Disclaimer: The information on this post and on this GuideSite are for general information purposes only; it is not intended to be tax or legal advice. Each situation is specific; consult your CPA or attorney to discuss your specific business questions.