What types of mileage can I write off for business purposes on my taxes?
Everybody dreads that time of year known as tax time. It's like a monster approaching, huge and starving. And everybody wants to know: Are there legal ways to avoid this beast, or at least make his attack a little more bearable? In other words, everybody wants to know about tax write-offs. What can I write off and what can't I write off. Etc. And when it comes to businesspeople and businesses, the questions start piling up even faster. One question that's often asked relates to automobile write-offs. Automobiles are big and complicated and expensive, and if you use yours a lot for work you can do some serious wear and tear without even knowing it. Also, there's the matter of mileage and gas. What can we do here to save some money?
Here are a few things to keep in mind.
1. When it comes to things like mileage tax write-offs, you want to stick to a general rule. It's easy to remember and it makes sense. It's a practical sort of rule. When you're considering writing this and that off for tax purposes (when it comes to anything: automobiles or whatever), remember that the government will want to know if your write-off is "ordinary, necessary, and reasonable." Ordinary, necessary, and reasonable. Let's look a little more closely at these conditions.
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2. The question is, "What types of mileage can I write off for business purposes on my taxes?" And then immediately we jump to: Whatever's ordinary, necessary, and reasonable. Ordinary means: It's not something unusual, it's not an exception to the rule. Necessary means you've just got to do it to keep your business afloat. And, finally, reasonable means-well, that's the hardest one. What may seem perfectly reasonable to you might seem to be an extravagance for the IRS. That's why you must keep a careful, careful record of your doings if you want to save money on tax write-offs. Keep meticulous track of your mileage, gas, and so forth. Keep meticulous track of repair needs, such as tires etc. Let's look at a few examples.
3. So, you're on a business trip and the mileage is mounting and you think: I know of this great little casino just off this exit here; I've already come so far, is a thirty or forty extra miles going to hurt anything? And the answer, of course, is Yes, it is. Attending a casino definitely does not meet the criteria outlined above, that is, something that's ordinary, necessary, and reasonable. That's your own time, and your own dollar. However, if you've got to go to Vegas because of an annual business convention that you attend regularly, and it's something that's important to your business, you'd be able to write off that sort of mileage when tax time lumbers around.
4. When it comes to gas mileage, there are two ways you can go at it. The first way is the easiest, and is known as standard mileage method. Under the standard mileage method you're working with the IRS, and they give you a flat deduction rate. For 2007, it's 48.5 cents per mile. So, you can deduct 48.5 cents for every business mile you travel, and that's that. It's said and done. The next method is called the actual expense method. This method is complicated, because you're going to be keeping careful track of lots of things: Not only mileage, but gas, repairs, maintenance, tolls, insurance, even car washes, and so forth. Then you total up the numbers and present those when you're doing your tax write-offs. It's more complicated, sure, but you'll save more money.
5. Again, be very careful when it comes to things such as mileage and tax write-offs. If you're ever audited, you'll want to have those numbers handy.
