TaxesTuesday: Mileage Deduction

How many days do you drive to the office and just sit and work your eight hours and then go home? If you are anything like us, that is a rare occurrence. Fortunately, any vehicle expenses incurred as the result of a job or a company that you own can be used to reduce your tax liability! There is just the small task of proving it…

The IRS requires that, if taking a deduction for vehicle expenses that a mileage log be kept [don’t worry there are apps to help with this] . Mileage logs must include the following information about the business miles and it must be broken down by vehicle:

1. Date
2. Starting and ending addresses for each drive
3. The purpose of each
4. The over all miles traveled

In addition, the IRS also wants to know how many total miles were driven by each vehicle that a deduction is being claimed on that year.

Generally speaking, as long as the vehicle that you are deducting expenses for has not and is not being depreciated, there are two ways that vehicle expenses can be taken. (And YES, regardless of which method you use, you must keep that pesky mileage log)!

Standard Mileage Deduction: This is simply taking the business miles that you have driven and multiplying it by the standard mileage rate. Then this entire amount then comes off on your taxes either as a business expense, or [if you are an employee and not a business owner] as a Schedule A, unreimbursed employee expense.

Note for the individual: if travel is reimbursed by the company that you work form then this is NOT tax deductible. Likewise, if travel reimbursement is offered by the company that you work for, but you do not take the reimbursement then mileage expense is NOT tax deductible either.

Actual Car Expenses: For this method, you would save all vehicle related receipts and keep your mileage log. At the end of the tax year, you would then prorate the vehicle expenses incurred, based on percentage of business usage of the vehicle.

For Example: If you have a car whose total miles driven were 30,000 and 27,000 of those miles were business miles, then 90% of most vehicle expenses for that year will be a deductible expense.

Note for the individual: if you are driving a company vehicle, then you must use the Standard Mileage Deduction method.

Situations when Vehicle Deductions are Disallowed: if a vehicle has been or is being depreciated, then the miles and expenses from that vehicle are not tax deductible.

Hope this drives your success!

Chelsea Auton
The Volpe Consulting & Accounting Team

Sources:

https://www.irs.gov/tax-professionals/standard-mileage-rates
https://www.irs.gov/uac/newsroom/2016-standard-mileage-rates-for-business-medical-and-moving-announced
https://www.irs.gov/pub/irs-pdf/p463.pdf

TaxesTuesday: Charity Travel Expense as Tax Deduction?

Many organizations have service trips that they do during the summer months. From the mission trips to Guatemala, to local service weeks, some of your expenses incurred while volunteering can be taken as a tax deduction. This means that you can use this to either increase the amount of your refund or reduce the amount that you will have to pay when you file your taxes!

Let’s run through some quick rules that the IRS publishes, just to make sure that everything you are planning on deducting is an allowable deduction.

The Basics:

• You must be volunteering for a Qualified Charity. Most churches and governmental organizations qualify, but the IRS does provide a tool that you can use to check on the status of a charity.
• What you spent must be:
  • Necessary
  • Unreimbursed
  • Directly related to your volunteer work
  • Expenses that were only incurred because of the volunteer work
  • Real expenses (meaning you must have a receipt for these expenses; or in the case of mileage, a mileage log)
• Can NOT be personal, living or family expenses

For Service Trips

• You must play a substantial role in the trip throughout. If you play a nominal role, then none of the expenses are deductible
• Your time is not a deductible expense, regardless of any income that may have been forfeited so you could go on the service trip.
• Travel expenses that are deductible:
  • Airplane, Train, Bus tickets
  • Car & Taxi expenses
  • Lodging expenses
  • Cost of meals
  • Transportation expenses incurred to get to and from the airport, or station and hotel.

Note: if a significant portion of the service trip involves recreation or vacation, none of the above are deductible.

For more information, please visit the IRS website and review Publication 526.

Happy Travels!

Chelsea Auton
The Volpe Consulting & Accounting Team

Sources:
https://www.irs.gov/uac/about-publication-526
https://www.irs.gov/pub/irs-pdf/p526.pdf