FINALLY, A SHORT GUIDE ON HOW TO (PROPERLY) TAKE THE MILEAGE DEDUCTION....

Ok, I'm going to clear up a couple things on one of the most often misunderstood tax deductions of them all...mileage.

This robot isn't worried about the mileage deduction because he works with PJF Tax

First off I am specifically referring to business mileage as this is the most often used type of mileage deduction (there is also charitable and medical).

There are three types of mileage, Business, Commuting, and Personal. You can ONLY deduct business mileage. Business mileage is any mileage after you get to your main place of work. This means your drive to the office and your drive back to the office are NOT considered business mileage but commuting mileage and therefore are not deductible.

Let's go through an example to clarify. 

Joe works at the local bank. He drives from his home to the bank which is 5 miles away (commuting). Joe has a client that he is meeting at the client's office. He drives 6 miles to get there (business). He has the meeting, it goes well, and he drives back to the bank, another six miles (business). After work he drives back home, another 5 miles (commuting). After he get home he goes to the grocery store for a gallon of milk. The store is 3 miles away (personal). In total Joe drove 25 miles. Of that only 10 is deductible but all of it has to be tracked. He needs to take notes on his business mileage to prove that it was business related. He should keep the addresses, name of the client, and the time/day he visited the client.  

Other fun things to consider:

- If you have a home office you can usually take a lot more business mileage because you are generally always driving to a client location. Keep in mind your home office must be your MAIN place of business and not a secondary office.

- Travel between your home and a temporary work location is deductible

- Working during your commute (work phone calls for example) or placing advertising on your car does not make commuting mileage deductible.

- You can only ever take mileage or actual auto expense (gas and repairs), never both.

- There are apps, like mileage bug, which will help you track your mileage. Remember you NEED to have support for any deduction you are taking, including mileage. A mileage log is a good way to do so.

Here is our mileage tax organizer that we use for clients to help track mileage.

2014 Mileage and Auto Expense Worksheet

Do you need some more help with tracking your mileage properly? Contact us or schedule an appointment to have your taxes prepared today!

Phillip R. Christenson

Office, 3131 Fernbrook Lane N., Suite 224, Plymouth, MN 55447, USA

Phillip Christenson is co-owner and financial advisor at Phillip James Financial, a Fee Only Financial Planning & Investment Management located in Plymouth Minnesota and serving the surrounding suburbs. He has been published and quoted in many national publications such as the Wall Street Journal, Chicago Tribune, Investopedia, etc.