Maximizing Tax Deductions for Small Businesses: Understanding Deductible Driving
As tax season approaches, it's crucial for small business owners to understand the importance of deductible driving. In this first part of our three-part series, we'll explore how tracking business mileage can lead to significant savings on your taxes. Don't miss out on this key deduction!
What Exactly Is “Business Driving?”
Does my commute to work count?
Unfortunately. No. Your commute to and from the office does not count at deductible business mileage.
When it comes to driving for business, if you commute from your home to your office and back again at the end of the work day, this is a non-deductible personal expense.
Your commute does not count as a business mileage deduction.
But, traveling from your home to another location for business-related needs does count.
For the following situations, these instances do merit the noting of business mileage.
Mileage traveling from your office to see a customer or a vendor counts.
Mileage traveling to the bank to make business deposits counts.
Mileage traveling to the post office to mail business packages counts.
Mileage to the office supply company to purchase business supplies counts.
Keeping Track of All Those Miles...
Running a small business can seem overwhelming. Seem? Let’s rephrase that. Running a small business is overwhelming. The laundry list of details to consider, monitor, and adjust, on a day-to-day basis, means that your focus is generally future-centric. You can forget to take notice of the items you should be attending to every single day.
When it comes to year-end taxes and taking deductions, that’s when you’ll wish you had been more organized.
In business, zooming in and zooming out of operations can be difficult. Focusing in on the small details matters. Focusing out and taking stock of the big picture matters too. Make sure you do your homework and understand just what you are eligible for as a small business. Reading blog posts like this can certainly help!
Writing down business mileage may seem like a small detail that won’t amount to much, but when you drive 15 miles to visit a business contact and drive 15 miles back to your office location frequently, the value is significant.
Are You Already Logging Business Mileage?
If you are a small business owner who uses your personal car for business, logged mileage can be one of the biggest write-offs you are entitled to.
Every year, the IRS sets a fixed standard mileage rate. Under this umbrella rate includes the cost of gasoline, oil changes, car repairs, car lease payments (if you make these payments), depreciation (if you own your car) and any other car-related expenses.
For the year of 2017, for cars, the standard mileage rate was 53.5 cents per mile for any business mile driven. For reference, in 2016, the standard mileage rate was 54 cents.
While choosing to use the standard mileage rate as one form of tax deduction, you can opt to deduct the actual expense method, which includes your actual expenses for using your car. If you decide to go this route, you will need to retain receipts from all car-related expenses. (Note: if you are already not keen on tracking individual mileage, retaining receipts throughout the year may not be your cup of tea…)
Helpful Mileage Tips & Tricks
Keep a mileage log book (and a pen!) in your car for convenient record keeping.
Take a note from us: if you think you will “remember” the mileage, you won’t.
If you absolutely abhor the thought of using old-fashioned technology and imagine this logging of miles to be completely tedious, consider using an app on your smartphone like MileIQ. With this app, the option to easily categorize driving for personal use versus business use is easy to adjust and sort through.
After you file your taxes for 2017, there may be a sense for 2018 to be more focused and organized. Staying on top of your entire deduction may come down to simplified and streamlined organization techniques throughout the year.