How Far Do You Need to Drive to Have Mileage Tax Deductions?
Driving your personal vehicle for business purposes is a common practice for a lot of people. The Internal Revenue Service lets you write off the expense of operating your car for business, medical and charitable purposes. You can choose whether to write off your actual expenses or take the standard mileage deduction. Your mileage tax deduction begins at the first mile.
Type of Mileage
The standard mileage rate for business, medical and moving purposes is adjusted periodically based on the average cost of operating a vehicle. The rate for charitable use is based on an act of Congress. If you choose the standard mileage rate, how much you can deduct for mileage depends on the purpose of your trip. The standard mileage rate for business use of your car was 55.5 cents per mile as of Jan. 1, 2012. You can deduct 23 cents per mile for moving or medical purposes and 14 cents per mile if you drove your car in the service of a charitable organization.
Business vs. Personal Use
If you use your car 100 percent of the time for business, you can deduct 100 percent of your mileage. If you use your car for both business and personal purposes, you can deduct only the miles you drove for business. The IRS requires you to keep a written mileage log to document your business miles, and this is one of the easiest ways of figuring your mileage deduction. Add up the total amount of miles you drove for business purposes and multiply the sum by .555. The result is your mileage deduction.
Business vs. Employee
If you were self-employed and operated your vehicle as part of your business, you can deduct 100 percent of your mileage deduction, even if you drove only one mile for business purposes. You would take the business use of car deduction on IRS Form 1040, Schedule C. If you operated your vehicle as an employee, and your expenses for using you car were not reimbursed, you can include your mileage deduction as part of your employee business expenses. Include your mileage expenses for medical purpose with your deductible medical and dental expenses. Include mileage for charitable organizations with your charitable contributions. To claim mileage for employee business expenses, medical and dental expenses or charitable contributions you must itemize your deductions on IRS Form 1040, Schedule A. Figure your mileage deduction for moving on IRS Form 3903 and report the total amount for your move on Line 26 of IRS Form 1040.
Not Fully Deductible
You must include mileage expenses incurred as an employee with your other employee business expenses. Those expenses are subject to the IRS's 2 percent rule. You can deduct only the total combined amount of these expenses that exceed 2 percent of your adjusted gross income. You must include mileage for medical purposes with your unreimbursed medical and dental expenses. You can deduct only the total combined amount of these expenses that exceed 7.5 percent of your adjusted gross income for the 2012 tax year. The threshold increases to 10 percent for expenses incurred after Dec. 31, 2012.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.