Business Mileage Tax Deduction - Molen & Associates

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How To Accurately Record Commuting Mileage and Increase Tax Deductions

Increase Tax Deductions With the Business-Mileage Rule

Using the Business Mileage tax deduction can be tricky. There are lots of situations that count while others do not. We don’t like commuting mileage. You should dislike it, too. It’s personal. It’s not deductible. But with knowledge, it’s avoidable!

With the right knowledge, you can completely get rid of commuting and make those trips from your home to your office deductible.

Generally, there are two ways to eliminate commuting mileage from your home to the office:

  • Make a temporary business stop on the way from your home to the office.
  • Establish a home office in your home.

The Temporary Business Stop Strategy

You can use the temporary business stop if your home has no home office. The stop will allow you to turn the commute from your home to the office into a deductible business trip.

If you drive from your home to your office, that is a personal trip. So, it is a non-deductible commute.

However, if you claim a home-office deduction, when you drive from your home to a business stop and from the business stop to your office, it qualifies as a business trip.

Note: If you have an office in your home that does not qualify as a principal office, then the IRS calls the trip from your home to the business stop the “first stop.” This trip is not deductible.

If your home office does not qualify as a principal office and you do not have an office outside the home. When you drive from that home office to a business stop and back home, the IRS does not recognize the trip as a business trip. Instead, it is a personal commute and is non-deductible under the IRS first and last stop rule.

The Home-Office Strategy

When you have a principal office in your home and another office outside the home. Then, there is no commuting mileage from your home to your office. You do not need to work at home to use this strategy. All you need is a home office that can qualify as a principal office under the law.

So, if you have a principal office at home and drive to your office outside the house and work all day at the office and then drive back home. The round trip from home to office and then back home is deductible business mileage.

Therefore, it is obvious that establishing a principal office in your home is the easiest way to eliminate commuting mileage and increase tax deductions.

Trips That Begin And End At Your Office

If the trips are to a business stop, then they qualify as business mileage. If they are to a personal stop, then they are personal mileage. However, if the trip involves business and personal stops and the personal stops are not far out of the way, then they can all be counted as business stops.

For example, if you drive 10 miles from your office to buy some office supplies, but on the way, you make a 1-mile stop to collect your dry cleaning. So, your round trip is 19 miles, and the direct trip to the business stop is 9 miles. This 1-mile detour is known as de minimis (minor), so you can record the whole 19 miles as business mileage.

When recording the mileage, you can write: “Round trip for office supplies, 19 miles (1-mile detour at dry cleaners, minor)”.

Using the Sampling Method

In order to satisfy the requirements for mileage log sampling, you must keep records of your business and personal miles for at least 3 months. Keeping your mileage log for three months is fine, but if possible, you can keep the log for the whole year.

Summary of using Business Mileage as a Tax Deduction

You have a deductible business mileage when you drive:

  • from your home to a business stop and from that business stop to your office.
  • from your home that has a principal office to your office outside the home.
  • from your office to a business stop.
  • from one business stop to another business stop.
  • from one business stop to another business stop with a minor (de minimis) personal stop.

You have a non-deductible personal mileage when you drive:

  • from your home to a business stop and back home (if you have no principal office in your home).
  • from your home to a first business stop, and from the last business stop back home (if you have no principal office in your home and did not stop at your office outside the home).
  • from your home to your office (if you have no principal office in your home).

Final Thoughts

Before you claim mileage deductions, make sure you write them down in your mileage log. If you are being audited, the IRS will ask for the log. The log must contain dates, destinations, and reasons for travel. You can do this by keeping a calendar in your car to record mileage. There are also apps that automatically detect when you travel and record the mileage.

Taking advantage of the business-mileage rule can increase your tax deductions. However, make sure that you follow IRS rules to be able to claim this deduction.

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