Standard Mileage Rate | robergtaxsolutions.com

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Hello again. Mike here. Today I am going to discuss some issues regarding automobiles. Don’t worry—I won’t get too crazy with the details as one could write an entire novel on this subject. It will be rather minor things that can have a big impact on your tax return. Also keep in mind that this is geared towards self employed taxpayers who use their auto for business and report income and expenses on Schedule C and not necessarily employees who use their vehicle for business and report it on a Form 2106.

Let’s get started with some numbers. The 2012 Standard mileage rate is 55.5 cents per mile. It is expected to be 56.5 cents per mile in 2013. A taxpayer can either deduct actual costs incurred by the taxpayer’s automobile, or use the standard mileage rate method to calculate the amount deductible by business use.

Most people use the standard mileage rate for whatever reason – it produces more of a tax benefit or he or she has not been keeping track of actual expenses. What makes up this seemingly arbitrary 55.5 cents(2012) or 56.5 cents (2013) per mile anyway? The IRS says that depreciation, lease payments, maintenance and repairs, gasoline, oil, insurance, and vehicle registration fees all make up this cents per mile figure.

Where most people jump off the diving board too early is figuring the costs NOT included in the standard mileage rate. These are costs IN ADDITION to deducting the standard mileage rate and it is applied using the business percentage of the vehicle. Parking fees and tolls are applied 100%.

These costs include:

Interest Expense
Personal Property Taxes
Parking Fees
Parking Tolls

Let’s do a quick example to demonstrate your tax savings. A single, self employed individual (we’ll call her Mary) makes $50,000 doing a catering business. Her cost of goods sold is $25,000 making gross income $25,000. She records 20,000 business miles out of 25,000 miles for the year. The overall balance due for this taxpayer is $2,061. Keep it simple here; don’t worry about dependents, adjustments to income, credits, etc.

She just records her mileage and nothing else because that is what she has been doing for years.
However, after talking to her astute accountant, she later points out that she paid $100 parking fees, a few tolls at $50, $300 in interest on the car, and paid considerate personal property taxes of $308.

The parking fees and tolls get added dollar for dollar to the standard mileage rate calculation. The interest and the personal property taxes are added by the business percentage or 80% (20,000 business miles/25,000 total miles). This “extra” $636 ($100 parking fees + $50 tolls + (80% * $300 interest) + (80% * 308 personal property tax)) is added IN ADDITION to the business mileage calculation.
After adding to additional information to the automobile, her balance due becomes $1,922.

Her tax savings are $139 ($2,061 – $1,922).

Happy Savings!

-Michael

P.S. Attached is a 2012 auto expense worksheet that will help you organize your automobile expenses and help you decide whether to do the standard mileage rate or actual expenses method.
2012 Auto Expense Worksheet

Claiming mileage on your taxes requires a good mileage log.

If you claim mileage for your business, your mileage log is your most important tax document!

Do you claim auto expenses for your business on your taxes? If the answer is no, you should probably skip this blog post. If the answer is yes, this is exactly the post you want to be reading.

I do a lot of audit work. Lots of audit work. Every audit that I’ve ever worked on where the taxpayer claimed mileage the IRS asked to look at the mileage log. Every single one! Small business owners are more likely to get audited than wage earners and most small business owners claim mileage. So—if you’re a small business owner, you need a mileage log.

So here is your new mileage log.

mileage log

All you have to do is fill it in with the miles and the appointments. It’s all set up and formatted as an Excel spreadsheet. There’s even room for other auto expenses in case you’re using your actual costs instead of mileage.

Did you know that you have to keep track of your miles even if you are claiming your actual expenses? It’s true. Often, people come to me with their auto receipts and I can’t do anything for them without their mileage. Whether you claim mileage or actual expenses, you must have a mileage log.

In order to do your mileage log correctly, you’ll need your odometer reading from the beginning of the year and from the end of the year. I like to take my readings on New Year’s Day during the Rose Bowl Parade. I started 2012 out with 81 miles on my car (I got a new car at the end of 2011.) Now I’m up to 8903. I should reach 9700 by the end of the year. Of those miles, about 5,000 of them are for business.

If I’m claiming straight mileage, I would take the 5000 miles times the 55.5 cents per mile that I’m allowed to claim for a deduction of $2,775. (The mileage rate for 2018 is 54.5 cents per mile.)

If I’m claiming actual expenses, then I’d take the 5,000 business miles I drove and divide that by the 9610 actual miles I drove during the year to get the percentage of my expenses that I could deduct. 5,000 divided by 9610 = 51.98%. So I’d total up all my gas and maintenance expenses and figure the depreciation and multiply that all by 51.98% to get the right dollar amount.

So you see, you can’t claim your actual expenses without having the mileage to figure the percentage.

Feel free to use it. Copy it. Give it to friends. It’s okay. We left the year off so that you can use it for multiple years if necessary. We’d like you to use it when you have us do your taxes, but if you use someone else’s, that’s okay. You can always use our mileage log. The point is that it is very important to have a mileage log for your taxes that we don’t care who uses it. It’s free. We’re not even asking you to sign up for anything.

If you’re claiming auto expenses on your tax return this year, you need to use a mileage log. If you don’t already have one, here’s one for you.

mileage log

Tag: Standard Mileage Rate

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