One of the most common ways to make money today is to be self-employed. If you are self-employed, your situation is not too different from others with jobs. One way or another, taxes must be paid. For this reason, you need to keep track of all your expenses and calculate how much taxes should be paid. In this article, we will focus on travel expenses.
We all know what they are: for instance, if you have a job that requires your being away from home during the day, or if you have another occupation that does not require you to leave your domicile, but still involves a lot of traveling.
What is the mileage for tax deductions?
As you may have already guessed, it is the distance of your daily commute to your job. This will be calculated based on the shortest route that you take during the day.
However, keep in mind that you can only claim the expenses for one route per day.
Here is an example: If every morning you drive to work and then return home in the evening, and if during the same period you also visit your family once, this would be considered as two routes. This means that for you to claim the mileage for tax deductions, you will have to calculate the distance for both. The same rule applies even if you change your route during a day or split your travel into several – shorter – trips.
Calculating mileage for tax deductions.
To Calculate Mileage For Tax Deductions, you must determine how many days per month you spend traveling to work. If you only go to work and return home once a day, this means that you spend about 20 days per month traveling.
The next step is to determine the distance of your commute ( as we said before, this cannot be longer than one route per day). If we assume that your trip takes 30 minutes, you must multiply the distance in miles by 0.575 (to calculate how many miles per hour, divide the number of minutes that you travel for six).
The next step is to determine the distance of your commute (as we said before, this cannot be longer than one route per day). If you travel five miles every day, multiply the number by 0.575 to calculate how many miles per hour. For thirty minutes, it is calculated as follows: 5 x 0.575 = 2.7
If you drive a car that gets 20 miles per gallon, this means that the mileage for tax deductions is 2.7 x 20 mpg = 54 gallons. If you drive a car that gets 20 miles per gallon, this means that the mileage for tax deductions is 2.7 gallons x $2 (the average price for gas in the area), we get $108/month (or 0.18 per mile).
The amount of money to be paid for mileage for tax deductions is 0.18 or $1.08, depending on how you choose to look at it, per mile. If the number seems too small keep in mind that you can not claim any expenses that are higher than your net income. Of course, if your commute is longer than one route – which will be the case if you have more than one job or if you are self-employed -, then the amount of money that you’ll receive is higher.
However, keep in mind that it doesn’t matter if your income is high or low. The amount to be paid for mileage for tax deductions remains the same.
Of course, if you are self-employed and decide to deduct mileage for tax deductions using the actual vehicle expenses method, then you will also be able to benefit from this option. This means that the money that you’ll receive for your commute (the number of miles multiplied by the number of cents per mile) will go on top of the one that you’ll get for using the standard mileage rate.
Also keep in mind that if you have a company car, you are unable to claim mileage for tax deductions on more than 5,500 miles per year unless your employer has an accountable plan. If this is not the case, then no matter how high the amount of money that you spend on your commute is, it won’t be valid for tax deductions.
To calculate mileage for tax deductions, add up the shortest route that you take every day and multiply it by 0.18(calculated above). You can also deduct mileage if you are self-employed or use a company car (in this case, make sure you check your employer’s policy regarding accountable plans). The amount of money that you’ll receive is directly related to your net income and will not affect it, so if you have a high income then you can still benefit from this option.