How to Calculate Mileage Deductions on Your Tax Return
Each year, the IRS announces the allowance for business miles driven in your personal car. If your employer doesn't reimburse you for business miles driven in your personal vehicle, or if your employer doesn't reimburse miles at the IRS allowed rate, you're entitled to deduct all miles driven for business at the current allowable business mile rate. File the 1040 long form and attach Schedule A for itemized deductions. The IRS provides you with the choice of how to claim business mileage. You may either deduct miles as an itemized expense or the actual costs of driving your car for business purposes.
- Discuss IRS 510 with your accountant: you may deduct the full cost of operating your car when it's used only for business purposes. To claim these costs, provide receipts for gas, oil, insurance, licenses, repairs, registration, and depreciation costs. If you lease the car, use the standard business miles deduction rate.
- Deduct mileage expenses if you're employed and seeking a new job. Just note the reason for your miles in the daily mileage log. Keep the mileage log in your car, along with pens or pencils.
- Moving expenses, when related to your job, are also deductible. To deduct moving expenses, you must begin working at a new employment location within the year. Your new home must be closer to your place of employment than before. You're also required to work full-time, or at least 39 weeks out of 52 weeks after your move.
- Make sure to keep track of and deduct business miles if you're an independent contractor. If you drive from a job location to another, you can deduct these miles as well.
- Some caveats: you can't deduct miles driven to your place of employment from home, or from your workplace back home. You can deduct miles driven to search for a new job, or the attend career fairs or employment screenings according to "Working for Yourself: Laws and Taxes for Independent Contractors."
- Record business, medical, or miles driven for charity work every day. Your handy mileage log - kept in your car - is the best way to keep track of the miles you drive. You must present daily mileage records to show how your car was used during the tax year. Each day must have the date, time, starting and ending odometer numbers, the distance you traveled and the reason you used the car.
- You'll be amazed at how much money you'll save by simply keeping track of your car mileage. Even if your employer pays for 100 percent of your business miles driven, submitting an expense report is a breeze when you keep a mileage log.
What You Need
- A Notebook or Mileage Log for the car
- Pens and Pencils
- License receipts (if you're claiming actual costs instead of miles)
- Gasoline receipts (if you're claiming actual costs instead of miles)
- Oil and Lube receipts (if you're claiming actual costs instead of miles)
- Insurance receipts (if you're claiming actual costs instead of miles)
- Repair receipts (if you're claiming actual costs instead of miles)
- Registration receipts (if you're claiming actual costs instead of miles)
- Calculator (optional)