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How the miles that you drive can add up to tax savings.

By MIKE EASTON, CPA

When I was reading recently about business-related tax deductions, I came across an article with this headline: “Self-Employed Workers Hit the Mileage Jackpot.” Indeed, that headline is absolutely correct, but just about everyone who uses a vehicle for business purposes, to drive to medical appointments, to volunteer for a charitable organization or to move 50 miles or more to take a new job could have the opportunity to claim, often overlooked, deductions on their tax returns.

And those deductions can add up rather quickly. For example, at 54 cents per mile, a 50-mile weekly business trip over the course of a year by someone who is self-employed will translate into a $1,404 tax deduction on a 2016 federal return.

For this reason, it is important to log all mileage that could possibly be tax-deductible and to maintain contemporaneous records of all your vehicle expenses – not only what you pay for gasoline, but also for oil changes, brake jobs and that new set of tires.

Let’s take a look at how the miles you drive can add to your tax savings, starting with those who are self-employed.

Mileage for self-employed workers isn’t subject to any threshold requirements, so every business mile driven is deductible. It doesn’t matter whether you’re going to a meeting with a client, to a networking event or to an office supply store for printer cartridges, you can claim a deduction of 54 cents per mile traveled.

However, if you have major expenses on the car you use for business (or a lot of minor ones), using the “actual cost” method may be more beneficial. If all those gas, oil, repair receipts and depreciation (and don’t forget your insurance premiums) add up to more than 54 cents per mile, then claim a deduction based on actual costs.

Be careful, however, if your vehicle use isn’t all business. If you drive it for personal use as well, only the business percentage is deductible. For example, if you put 15,000 miles on the car and 5,000 was for business, only one-third of your total expenses can be deducted.

That’s why it’s important to record your mileage at the start and end of the year and to keep a log that shows miles driven, destination and business purpose. For those of us who sometimes forget to write everything down, you can download apps to your smartphone that do most of the work for you.

In your first year of claiming a deduction for business use of a vehicle, you should evaluate the use of the standard mileage rate as compared to the actual cost method to determine which method will be most advantageous. If you use the actual cost method in the first year, the IRS requires you to use actual costs for every year thereafter, even if it would result in a smaller deduction.

Keep in mind too that driving from your home to your office is considered commuting, not a business expense, so these miles are not deductible. Making business calls while you’re driving doesn’t make it a business trip either.

However, if you have a home office that serves as your principal place of business, travel to a second business office is considered deductible.

Those who itemize their deductions on Schedule A may be able to deduct mileage in several other ways.

Employees of businesses: If your company offers a reimbursement rate that is less than the IRS standard, you may qualify for a deduction. For example, if your employer is reimbursing you at a rate of 30 cents per mile this year, you can claim a deduction of 24 cents per mile on your tax return. Save copies of your reimbursement forms so you have an accurate record.

Charitable: If you volunteer for a charitable organization, you can deduct 14 cents per mile for travel to and from your volunteer service.

Medical: You can deduct 23 cents per mile driven to doctor’s visits, hospitals, lab tests and to pick up prescriptions. However, your total medical expenses (mileage and other bills combined) must exceed 10 percent of your gross income (7.5 percent if you’re 65 or older) to be deductible.

Moving: If you’re moving 50 miles or more because of a change in jobs, you can deduct 19 cents per mile, provided you work fulltime for at least 39 weeks of the 12 months following your move. (In some situations, you can also take a deduction for miles driven to find a job in your current occupation.)

One more thing: parking expenses and highway tolls are also deductible, but make sure you enter this information in the right place on your tax return. However, if you stay too long or drive too fast and wind up getting a ticket, these fines are not deductible.