Are you self-employed or do you volunteer a lot? You may be eligible for mileage tax deductions. It is important to track all mileage driven for work, medical appointments, volunteering and even moving. The federal deduction for mileage is significant and make a dent in your annual tax payment.
The average taxpayer can receive as must as 54 cents in deduction per mile driven. This means a ten-mile drive can produce $5.40 in deductions. This is not just for business mileage. Miles you drive for medical reasons or for charitable work can also be deducted. There are rules for each deduction and you must keep careful records.
If you are self-employed, you can take the highest deduction rate and have the least restrictions. Self-employed business owners can deduct 57.4 cents per mile driven for business. These miles can rack up when you consider business meetings, picking up supplies, and traveling to a secondary work site. There are no thresholds when it comes to the self-employed. You can deduct every single business mile. Imagine being an Uber driver and the number of miles they can deduct!
The self-employed aren’t the only people who can benefit from the mileage deduction. As long as you itemize on your taxes, you might be able to deduct mileage for medical, charitable or moving expenses.
If you travel frequently for doctor visits, pharmacy pickups or for other medical treatment, you can count these miles for a mileage deduction. You can claim 23 cents for each mile driven, but only if the mileage combined with other medical bills exceeds ten percent of your adjusted gross income. If you are 65 or older, this threshold drops to 7.5 percent.
If you volunteer for a charitable organization or nonprofit, you can deduct these miles in your charitable donations deductions. You can claim 14 cents per mile. You must be personally volunteering, not driving anyone else to a volunteer activity, including family members. There is no threshold for this mileage deduction and the amount does not have to exceed any portion of your income.
If you are moving because of your job, you may be able to deduct your mileage. The move must be at least 50 miles unless you are on military orders. You must work at least full time for 39 weeks in the year following the move. This deduction is 23 cents per mile.
Another possible mileage deduction is for employees who travel for work and are not reimbursed for their mileage. Even if they are, the employee can claim the difference between what their employer reimburses and the federal mileage deduction. For example, if an employee is reimbursed 25 cents for each mile, you can then claim the additional 32.5 cents in mileage deductions on your annual taxes. Be aware, however, that your expenses must exceed two percent of your adjusted gross income.
If you plan on taking mileage tax deductions, be sure to keep careful and detailed records. If you are ever audited by the IRS, they will want to see your documentation and it should include destinations, dates, and reason for travel.