Mileage (Tax)§
Definition§
Mileage (Tax) is a tax deduction that allows taxpayers to claim expenses for the business use of their vehicles. It is calculated either by using the actual expenses incurred while using the vehicle or by applying the standard mileage rate set by the IRS. This provision is available for self-employed individuals, business owners, and employees who use their vehicles for business purposes, provided they meet certain IRS requirements.
Examples§
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Self-Employed Consultant: A self-employed consultant drives their own car to visit various client sites. They can deduct the miles driven for business purposes by keeping a detailed log and using the standard mileage rate for the deduction.
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Real Estate Agent: A real estate agent who uses their car to show properties to clients can use the standard mileage method to calculate the deduction for business travel.
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Small Business Owner: A small business owner who uses their personal vehicle to make deliveries or attend business meetings can use the mileage deduction to offset their taxable income.
Frequently Asked Questions§
Q: What is the standard mileage rate for 2023?
A: The IRS sets the standard mileage rate annually. For 2023, the rate is 65.5 cents per mile for business use of a car.
Q: Can I switch between the actual expense method and the standard mileage rate method?
A: Yes, you can switch between methods from year to year, but specific rules must be followed, especially if you’ve previously claimed depreciation.
Q: What types of mileage are deductible?
A: Business-related mileage, medical or moving mileage (specific situations), and charitable service mileage are deductible, each subject to specific rules.
Q: Do commuting miles qualify for a tax deduction?
A: No, miles driven from your home to your regular place of work (commuting) are typically not deductible.
Q: Do I need to keep a mileage log?
A: Yes, the IRS requires detailed records of the miles driven, the purpose of each trip, and the dates to substantiate the deduction.
Related Terms§
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Standard Mileage Method: A method of calculating vehicle expenses for tax purposes based on a per-mile rate set by the IRS.
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Actual Expense Method: A method of calculating vehicle expenses that includes all operating costs such as gas, oil, insurance, and maintenance.
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Depreciation: A deduction representing the decrease in value of a vehicle over time due to wear and tear.
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Business Use Percentage: The proportion of total vehicle use attributed to business purposes, used when calculating actual expenses.
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Commuting: Travel from one’s home to their primary place of work, which is typically not deductible.
Online Resources§
- IRS Publication 463: Travel, Gift, and Car Expenses
- IRS Standard Mileage Rates
- TurboTax Mileage Deduction Guide
Suggested Books for Further Studies§
- “Taxes for Small Businesses QuickStart Guide” by ClydeBank Business - A comprehensive guide to business taxes, including vehicle deductions.
- “JK Lasser’s Your Income Tax Professional Edition 2022” by J.K. Lasser Institute - A detailed resource on managing tax deductions for personal and business expenses.
- “Deduct It!: Lower Your Small Business Taxes” by Stephen Fishman - Practical advice on maximizing tax deductions, including mileage.
Fundamentals of Mileage (Tax): Taxation Basics Quiz§
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