The IRS allows small business and home-based business owners to take a large mileage deduction. However, there are strict rules that must be followed. These rules apply specifically to record keeping and documentation. Consulting with an experienced Certified Public Accountant will allow you to gain as much of a tax deduction as legally possible.
What to Document
IRS mileage deduction rules are available on the Internet. However, if you are looking for a quick reference, government requirements ask that you keep records for at least 90 consecutive days. Furthermore, the rules require that drivers record the date, business name, destination, and beginning and ending odometer readings.
90 Day Record Reflects Driving Habits
The IRS is looking to determine what percentage of individual driving is used for business or personal needs. Therefore, a 90-day mileage record is considered a valid representation of a person’s driving habits. As of January 1, 2010, a deduction of $.50 can be applied to all business miles driven.
Detailed Information Not Necessary
The IRS says that individuals do not have to be exact about the actual purpose for every business trip. For example, when heading to a diner to meet a prospective client or colleague, simply recording this as a business meeting will suffice. This means that it is easier for you to keep track of your mileage.
Personal Errands Fly Under The Radar
The IRS is not going to get extremely particular about what you do when leaving the diner, like going next door to the cleaners to pick up your laundry. Nothing prohibits individuals from conducting quick personal errands after having a meeting with a business colleague. However, a CPA will advise personal shopping activities not be recorded in your mileage log.
Charity and Medical Miles Can Be Deducted
Individuals are not limited to merely taking a mileage deduction for business trips. Personal miles can be deducted if the trip is for charity or medical purposes. Furthermore, tax deductions from moving to obtain a new job can be recorded and used if the new location is more than 50 miles away. The 2010 rates for medical or moving miles are 16.5 cents. The deduction with driving for charitable organization is 14 cents.
Get an App to Help You Remember
Maximizing mileage deductions calls for good record keeping. The best method is an in-vehicle mileage log. However, sometimes it is difficult to locate a pen when attempting to record mileage readings. The iPhone has a new app that will generate a mileage log for you. Check for available apps for your specific smart phone to help keep your records straight. If all else fails, keep a notepad in your car and get into the habit of recording miles manually.
For more in depth information, make sure to consult your certified public accountant.