It is safe to say that as a business owner, you have a lot on your plate. From keeping up with inventory to managing employees- the last thing you want to worry about is your taxes. However, if you don’t keep tabs on your expenses throughout the year, come tax season, you will be scrambling to remember everything you spent. Matthew Nicosia points out that this is where the Standard Mileage Deduction comes into play.
Standard Mileage Deduction – Explained By Matthew Nicosia
The Standard Mileage Deduction is a method of calculating the business use of your car expenses using a per-mile rate. The main benefit to using this deduction is that you don’t have to keep track of your actual expenses (i.e., gas, oil changes, repairs, etc.).
In order to claim the Standard Mileage Deduction, you must first determine if you are eligible.
Requirements to Determine Eligibility:
To be eligible for the Standard Mileage Deduction, you must:
-Use your car only for business purposes
-Have a record of your business miles driven
If you use your car for both business and personal purposes, you can still claim the deduction, but you will need to calculate your expenses based on the percentage of miles driven for business.
Determining Your Business Use Percentage:
The first step in determining your business use percentage is to figure out the total number of miles you drove your car during the year. Next, determine the number of those miles that were used for business purposes. The IRS considers any mileage driven while performing the following activities as business use:
-driving to meetings or appointments
-driving to a client or customer’s location
-transporting products or equipment related to your business
-attending conventions or seminars related to your business
Once you have determined the number of miles driven for business purposes, divide that number by the total number of miles driven during the year. This will give you your business use percentage, which you can then use to calculate your deduction.
How to Claim the Deduction:
In order to claim the Standard Mileage Deduction, you will need to file IRS Form 2106. This form must be attached to your tax return in order for the deduction to be valid.
On Form 2106, you will need to include the following information:
-the total number of business miles driven during the year
-the reason for each business trip
-the starting and ending odometer readings for each business trip
If you are claiming the Standard Mileage Deduction, you cannot also deduct your actual car expenses. You must choose one method or the other.
Tips for Success:
-Remember, you can only claim the Standard Mileage Deduction if you are using your car exclusively for business purposes. If you use your car for both business and personal reasons, you will need to calculate your expenses based on the percentage of miles driven for business.
-Be sure to keep a log of your business miles driven throughout the year. This will come in handy come tax season when you are calculating your deduction.
-If you have any questions, be sure to consult a tax professional to ensure you are taking the correct deduction.
Matthew Nicosia believes that the Standard Mileage Deduction can be a helpful way to calculate your business use of car expenses, as it eliminates the need to keep track of actual expenses throughout the year.