The mileage tax deduction is a great way to save money if you use your car for business purposes. This plan allows people who are self-employed, in the military, or traveling for charitable work or medical reasons to claim 58.5 cents per mile they commute with their vehicle going forward into 2022.
Who can claim?
Before 2017, employees could deduct mileage. However, this has been changed by the TCJA as a result of tax reform so that most employees can no longer claim mileage on their taxes. Some individuals may still be able to take advantage of the deduction-
- Specifically qualified to perform artists.
- Reservists in armed services.
- Others include individuals traveling for volunteer work or medical appointments; they can also use travel miles to get reimbursed by their employer if they cannot do so through their deduction account.
Mileage deductions for SE professionals
When filing mileage tax deduction for the year as a self-employed person, you’ll need to include information about when a car was used for business. Your mileage rate is 58.5 cents in 2022, and that number is bound to increase every year. If it’s not clear what it includes as business miles driven, just count the trips after arriving at work or before returning home from your last stop of the day. These trips are most likely deductible. Only trips between business locations can be deducted for mileage on taxes, so drives between those stops should only be considered business miles traveled.
For other employees other than SE professionals
The IRS has changed the tax code for 2019 to help you save on your mileage expenses. Starting in 2022, as long as your first destination is no more than 100 miles away from home and it’s related to work-related travel, it means driving or taking public transportation. You can deduct these costs at a rate of 58.5 cents per mile. You’ll report however much mileage on Form 2106 when filing taxes next year.
For other mileage deductions
Mileage for medical care and charitable work includes itemized deductions. It would help to investigate the difference in tax benefit between the standard deduction and itemized deductions before deciding which one to claim. The $0.18 per mile rate includes your medical deduction (for 2022). In contrast, the rate of $0.14 per mile includes your charitable deductible (for 2022).
Not allowable mileage tax deduction –
4.Except for vehicles used in fleet operations, you cannot claim the standard mileage rate if the car is used for lease
5. If a car depreciates using any method other than straight-line depreciation
6. If it has been claimed as a Section 179 deduction by owner or lessee
7. If you rented a qualified vehicle and received an actual expense reimbursement (as opposed to tax-deductible);
8. If you’re classified as a rural mail carrier who receives eligible reimbursements
If you are a driver for Uber, doing so is one of the best ways to reduce your tax burden by two different types of tax-income and self-employment. This can be doubly important because many people have to pay taxes on their rideshare income-once as an employee (for social security) and once as an independent contractor (for Medicare).
Standard mileage rate vs. The actual car expense method
The implications of choosing the standard mileage rate vs. the actual car expense method are
different. Still, it is essential to note that you must stick with whichever one you choose for a particular year when scheduling your return. If in later years, you switch methods, specific depreciation rules will apply.
Rideshare expenses fall into two categories of costs – Vehicle expenses costs and ordinary operating expenses.
Ordinary operating expenses –Everyday operational spending includes everything from the phone you use for your business and your wireless plan to the car insurance that allows you to drive for Lyft or Uber. Many of these items are also for personal use, which means they belong on a personal income tax return (e.g., cell phones). For this reason, many people use one bank account or credit card for all their business transactions.
Actual vehicle expenses-
9. Lease payments, including any recurring charges that are not associated with property taxes and insurance.
10. Auto insurance.
11. Gasoline for driving to work or other errands on days when you do not use public transportation (if needed)
12. Maintenance costs such as oil changes, brake pad replacements, Tyre rotations, and new Tyre purchases at a price less than renting a vehicle for these purposes
A much simpler way to calculate the use of your car for business purposes is by using the Standard Mileage method-The Standard Mileage method does not require tracking individual purchases or storing receipts. The business portion of your mileage calculates by multiplying the total mileage you drive by 50 % (e.g., 10,000 miles x 50 percent business use = 5,000 business miles). For 2022 standard mileage deduction is $.585×5000=$2925.
Uber makes it easier to track your miles to calculate your total mileage. The business mileage tax deduction is not the same as personal. Only those driving for work are what goes into the total number of miles you drive and can be deducted from taxes that come with each paycheck. There are some limitations when you use the Standard Mileage deduction to calculate your car-related expenses. For example, if you have a breakdown and need to replace your transmission with an expensive one, or when any other major repair is made to it in case of a significant expense, that will tax the limit of this method. You won’t know for sure what’s best until creating both logs and accounting for taxes as needed.
Summary: Considering that calculating your business expenses can significantly affect how much you get back in taxes, keep complete records of all mileage tax deduction. For example, if one method leads to more tax returns and the other less, always use the technique, leading to more income for yourself. Just step into the Flyfin mileage tax calculator to do everything from start to finish. The AI-enabled platform will walk through each form with you, so there’s nothing left unanswered in the process. Get unlimited support on how our Flyfin software works and what it can do when it comes time to file.