Unfortunately for business owners, those with medical issues causing them to drive for treatment, and people who drive for charities, the IRS has decreased mileage rates across the board.
Here are the 2017 vs. 2016 cents per mile numbers:
- Business Mileage: 53.5 in 2017 vs. 54 in 2016
- Medical or Moving Mileage: 17 in 2017 vs. 19 in 2016
- Charitable Mileage: This rate has not changed from 14 cents per mile because it is held constant by a statute
So how do I take advantage of these mileage rates?
Well that depends on your circumstance. Let’s look at the three mileage types and how to use them to reduce your tax liability.
Business Mileage:
If you are self-employed and you operate a vehicle you own (or lease) as part of your business, you are eligible to use the mileage deduction. There are two options that the IRS provides to you. First you can take the actual costs of operating the vehicle (gas, routine maintenance, car washes, etc.) plus depreciation on your tax return. This requires more accounting effort due to tracking the various expenses. You can also choose to use the business mileage rate for all of the business miles that you drove during the year. The mileage rate includes gas, maintenance, car washes, and even depreciation.
The IRS allows you to choose whichever method of vehicle expenses you would like. However, you cannot switch methods for individual vehicles. That means that however you choose to track expenses the first year for any vehicle is how you must continue to track expenses as long as you use that vehicle. If you have multiple vehicles, you may use different methods for different vehicles. Vehicle expenses, whether mileage or actual expenses, are deducted straight from revenue earned.
If you are an employee, you may also be able to use the mileage deduction. If your employer requires you to drive your own vehicle as part of your employment, you are eligible to deduct the 53.5 cents for every business mile you drive. Keep in mind that your commute to and from your office or main place of employment does not count. It is only the miles you drive in addition to your normal commute that are deductible. The deduction is made on Schedule A of your tax return as an itemized deduction for employee related expenses.
Whether you are an employee or self-employed, the IRS requires that you keep a log of the miles that you drive. This includes recording the date, miles driven and odometer readings before and after the business related trip. There are now smart phone apps that can help you easily keep track of the miles you drive.
Medical and Moving Mileage:
The IRS allows you to deduct miles that you drive to move from one town to another due to a new job, or to receive medical treatment. The miles driven when you move are deducted on page one of your 1040 tax return as a moving expense (at 17 cents per mile.) Miles you drive to receive medical treatment are deducted as a medical expense on Schedule A as an itemized deduction. Make sure your move qualifies to result in deductible moving expenses before including the mileage deduction on your return.
Charitable Mileage:
Any mileage you drive for a charity such as transporting people or items, can be deducted as an itemized deduction on Schedule A at a rate of 14 cents per mile. Driving to perform work at a charity or event do not count. The miles must be driven for a charity. For example, if you decide to pick up a homeless person and drive them to the train station these miles would not be deductible.
Things to remember:
- Keep an accurate log of the miles that you drive, no matter which category of mileage deduction you are taking.
- You can choose the vehicle expense that is highest for you if you are self-employed. You just need to stay consistent year after year with that vehicle.
- The IRS does change the rates yearly (although the charitable rate is fixed for the time being)
