Rising gas prices have led many people to try to reduce the number of miles driven each day. For many, however, cutting down their miles is a challenge. They must drive as part of their job duties, regardless of the cost of gas.
Independent contractors and freelancers often fall into this category, along with other people. Fortunately, these men and women can deduct certain travel-related expenses, whether the trip is for business, medical, charitable, or moving purposes.
Drivers can choose between two methods when calculating mileage, and this is just one deduction a person can take if they are using their vehicle for business or charity. For example, a person might ask:Is car loan interest tax deductible?”
The standard kilometer rate
Men and women who want to take advantage of this deduction should know the current standard mileage rate. The IRS determines this rate each fall, and in some years the rate increases. This is not always the case, however. Some years it goes down. How does the agency calculate this rate?
According to Realtimecampaign.com, when calculating the standard mileage rate for a year, the IRS may conduct an annual study that focuses on the costs associated with operating a vehicle. This study can take into account both fixed and variable costs. Anyone wishing to obtain more information on the additional deductions can click to read This article.
Individuals can choose to take the standard mileage deduction or calculate their actual vehicle expenses for tax purposes. Using the standard mileage deduction, the driver keeps a log of the number of miles they drive for business, medical, charitable or moving purposes. They then multiply the number of miles by the rate established by the IRS for the year. For those who choose to deduct their actual vehicle expenses, they should keep receipts and relevant documents related to their driving expenses.
Drivers must keep records of their vehicle usage for tax purposes when using the second method. They must document all costs related to the use of the vehicle. This includes the gas and oil they put in the vehicle, repairs, tires, etc. The driver can also include insurance, licenses, fees, etc. when documenting the professional use of the vehicle. Once they have documented all the expenses, the owner adds them up and determines the percentage of vehicle use for business purposes. They multiply the total expenses by the percentage used for business and deduct the resulting figure from their taxes.
Many people find this method too complicated. They choose to use the standard deduction. Technology makes it easy to do, and countless people may choose to use something like MileIQ to record kilometers driven for work, charity, medical or moving purposes. In doing so, the driver must document the reason for the trip, the date and time and the number of kilometers driven.
People need to make sure they take all deductions on their taxes. With the help of technology, it has never been easier. Start tracking miles today and see how it will save you money.