Compassion and Competence

Ansible Tax & Document Research Services

February 28th, 2014 at 1:33 PM

Mileage deductions can make you filthy rich 9 ways

OK, I’m kidding. But check it out! The IRS Mileage Deduction, aka the “Standard Mileage Deduction,” is probably one of the few tax deductions that will light up your life with its simplicity and benefits.  For spending just a bit of your time you can reap valuable tax savings for money that you have already spent.

Even better, these deductions are available for something that you had to do anyway: travel for work, medical treatment, or to render charitable services.

By Deborah Lagutaris, J.D., B.A., RTRP, CTRP, Ansible Tax Services      February 28, 2014

I can help you save on taxes!

I can help you save on taxes!

1. You may be able to turn your small business profit into a loss, or gain other advantages, by simply taking the standard mileage deduction.

2.  Take this un-trivial fact: using the standard mileage deduction for each business mile* you drove in 2013, you may take a deduction of 56.5 cents PER MILE. This adds up quickly. Say you drove 5,000 business miles last year. Your deduction would be $2,825.

3. Translating that into your tax bracket, say 15%, that means $423 more in your pocket. As you may know, the higher your tax bracket, the higher the net value of your deduction. Changing the example above to illustrate: at 25% tax bracket, the $2,825 deduction yields $706 instead of $423. (It’s worth citing this fact when people in higher tax brackets complain about how much the pay.) When you are at the edge of a tax bracket, it is worth looking at accelerating or delaying certain income or expenses to take advantage of this effect. I can help.

But I have a good personality!

But I have a good personality!

4. But wait! There’s more! Miles that you drive for medical and dental care are also deductible, at the rate of 24 cents. That’s not a figure to sneeze at (cough.)

5. Do you drive when you volunteer at your charity? Those miles are deductible too. Give yourself 14 cents per mile.

6. You need not keep extensive records and receipts to claim these miles.

6.a Merely keep a record of the miles you drive each day for the specified purposes. If you have not done this at the time, give a try at reconstruction using your personal calendar. It may seem daunting at first, but you will soon see rhythms developing. And then you can toss all those little bitty gas receipts, eh?

7.  Depreciation deduction: You may take the “parking and tolls” deduction as well as the standard mileage deduction and depreciation, as the auto is a capital expense, on a 7-year schedule. Let the tax program figure it for you.

TRICKY:

    • if you depreciate your vehicle, you may NOT take the “parking and tolls” deduction OR the standard mileage deduction.
  • if you take the standard mileage deduction, THOU SHALT NOT DEPRECIATE THINE VEHICLE.
  • therefore, you either keep really good records and reap some additional reward, or write it all off at 54.5 cents a mile or whatever it is this year.

 

8. The rates change every year. Following this article I include a table for the mileage reimbursement rates for the last 7 years. Remember, I specialize in helping people who are behind on their taxes.

A visual pun from Germany

A visual pun from Germany

9.  There’s another way to claim these expenses. Some taxpayers benefit from taking actual automobile operating and ownership expenses, but the time required may prove unduly burdensome for most of us. The standard mileage deduction was developed to save taxpayers the bookkeeping headaches of saving every receipt for every cent we spend on our car.

To wrap it up, for most of us, the standard mileage deduction is ideal.      

###

I would be happy to prepare your Federal and State Tax Returns for any and all states except New York. It can all be accomplished via the Internet.

NOW is a good time to start! Send an email to Deborah@ansibletax.com

*Danger: do not confuse business miles with commuting miles. Commuting is driving from home to your regular job that you get a W-2 for. Commuting miles are not deductible. I don’t understand why not, but that’s a matter for another discussion, after tax season ends on the “Ides of April.”

Rates derived from the IRS website, www.irs.gov  and http://www.efile.com/tax-deduction/mileage-rates/ accessed February 28, 2014.

IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

IRS Mileage Table

 

Year          Business         Medical          Charity

2013          .565                  .24                    .14

2012          .555                  .23                    .14

2011          .555                  .23                    .14

2010          .50                   .165                   .14

2009          .55                   .14                     .14

2008          .505/.585*    .27                    .14

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