As a self-employed professional, leveraging the IRS Business Miles Deduction can significantly reduce your taxable income. However, to qualify for this deduction on your S-Corporation return, meticulous documentation of your business mileage is essential.
Business miles include any driving from your business location to meetings, events, and business-related meals. However, commuting miles, such as those driven from your residence to your workplace and back, are not deductible. This can be tricky for self-employed individuals whose residence often doubles as their workplace.
For self-employed individuals working from home, most trips to business meetings and back home can be considered deductible business miles. The key exception is if you return home from a meeting and do not continue working afterward.
MileIQ, an app available on iOS and Android, simplifies mileage tracking by automatically detecting when you drive and allowing you to tag trips as either business or personal.
The app generates detailed reports that can be sent to your tax preparer, showing total business miles and their value based on the federal rate.
According to the IRS, you can calculate your deductible car expenses using either the standard mileage rate method (mentioned above) or the actual expense method. The standard mileage rate is straightforward, but there are specific conditions to meet.
For instance, you must own or lease the car, and certain deductions, such as depreciation, must not have been claimed using other methods.
The actual expense method involves tracking all costs related to the business use of your car, including gas, oil, repairs, insurance, and depreciation.
Accurate record-keeping is essential to substantiate your claims, whether using the standard mileage rate or actual expenses. In most cases, we find that 1099 professionals that drive more frequently for work, will see much greater tax savings using the mileage method vs actual expense method.
For detailed IRS guidelines, visit the IRS Business Use of Car page.
To have confidence you're not overpaying in taxes, be sure to consult with a tax professional.
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