Did you know that according to the IRS the miles you drive for your business can count as a tax deduction? It’s true. The IRS gives you two different ways to track your car expenses to create this associated tax deduction: “Standard Mileage Rate” and “Actual Expenses.” Each of these methods assumes that you use your vehicle for both business and personal purposes.
The Standard Mileage Rate:
The IRS allows employees and self-employed individuals to use a standard mileage rate for business driving which is 56.5 cents per mile (for 2013) and 55.5 cents per mile (for 2012). Keeping an accurate record of how many miles you drive for business throughout the year and recording them when you travel, is important. This is especially vital if you are audited; the IRS will want to see proof of the miles you’ve driven for your business.
The Actual Vehicle Expenses method:
Throughout the year, keep track of the money you spend on your car: Gas and oil, maintenance and repairs, tires, registration fees, licenses, vehicle loan interest, insurance, rental or lease payments, depreciation, garage rent, and tolls and parking leases. You can total this number and multiply it by the percentage you used your vehicle for your business. The percentage of time (based on miles) that the vehicle is used for business determines the deductible portion of these expenses, so just like in the first method, keep an up to date trip log!
Intuit PaperTrail takes the effort out of this process. No more worrying about where you wrote down your miles or having to do confusing calculations, Intuit PaperTrail does all the work for you. Simply record your miles right into the app and combined with entering your odometer readings at the beginning and ending of the year, you have a clean report of all your trips and the percentage of total miles that you drove. To track odometer readings: 1) Go to the ‘Trip Log’ page by clicking on the menu icon in the top right 2) Click on the miles summary box at the top
If you’d like more details about tax deductions for your business travel please check out the IRS link.