How to Calculate Mileage for Taxes

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Employees and self-employed workers have the opportunity of getting unreimbursed mileage expenses as itemised deductions while filing the year tax returns.

The federal government through the IRS allows certain expenses to be deducted against tax.

These expenses related to using the vehicle for business purposes.

Also, any miles accumulated due to medical purposes, moving, and charitable purposes are also allowed the deduction.

It is the responsibility of every employee to track the mileage covered during the year and computed it as mileage so that it can be deducted against the taxes.

What Mileage Can be Deducted Against Taxes?

Know your mileage rates

Through the internal revenue service website at www.irs.gov, you can learn the tabs of mileage deductions available for taxpayers.

The rate usually changes every year, and therefore you will need to double check the rate applicable for the year that you are filing tax returns for.

For example in the year 2018, the standard mileage rate is as follows;

  • 54.5 cents – Business drives
  • 18 cents – Medical and moving drives
  • 14 cents – Charity drives

Calculate mileage covered for business

Examples of mileage covered for

  • business purposes include visiting clients or customers
  • attending a business meeting away from your regular place of work
  • visiting a temporary workplace
  • or traveling to different offices within a region

The business mileage deductible for the year 2018 is 54.5 cents per mile traveled.

Calculate mileage covered for moving mileage

For you to be able to deduct moving mileage, you must meet the distance qualification and time as prescribed by the IRS.

The distance between your former home and your new job must be at least 50 miles away from your previous employer is located from your new home.

If for example, you used to commute at least 5 miles each way in your previous job, then the distance from your new job to your old home must be at least 55 miles away.

  • Use the shortest route – The IRS demands that you use the shortest commutable routes between your two new locations, i.e. your new job and your new home to help you evaluate the distance as prescribed by the IRS distance testing rules.
  • Work at least 39 weeks – To qualify for moving mileage deductions, the IRS prescribes that you must work at least 39 weeks of the year in your new job location to be able to deduct moving expenses along with the mileage covered.

The moving mileage rate for the year 2018 is 18 cents per mile covered.

Calculate mileage covered for medical purposes

The allowed medical mileage for tax deduction purposes is the one taken when travelling to and from a hospital or medical care centre.

Tolls, parking fees and all the other associated travel fees should be listed separately.

The medical mileage in 2018 can be deducted at the rate of 18 cents per mile driven.

Calculate mileage covered for charity purposes

All the miles covered when travelling to and from donation locations as well as volunteer work for a charitable organisation are an allowed deduction against tax.

The rate applicable for the 2018 tax year is 14 cents per mile driven.

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How to Keep Track of Mileage

Use a mileage tracking app

A mileage tracking app such as GOFAR will automate your mileage log book so that you don’t have to keep manual records that are tedious and are prone to errors.

GOFAR helps you to track your mileage, detect faults in your car engine, linked you with part suppliers and mechanics in your area, and remind you when you need to take your car for scheduled maintenance.

GOFAR also finds you are car’s engine sweet spot to help you drive smarter and spend up to 30% less on fuel.

It comes with a free app that is easy to install and does not need extra tools to function properly.

Record the applicable mileage only

As a general rule, the deductible mileage is the ones that have been described above.

Your trips to your office and back are considered commuter miles, and they are not applicable when calculating deductible mileage for tax purposes.

The IRS considers where you live a personal choice and therefore the expense will be on you regardless of whether you live far away from the office or not.

In some companies, you will be given mileage allowance, or there will be some other kind of arrangement if you have been given a company car.

If you have been reimbursed for your mileage by your employer, that mileage is not an allowable deduction.

Speak with your financial advisor to understand the implications of reimbursed mileage and deductible mileage to your overall salary.

Calculate your total mileage at the end of the year

To compute the total mileage deduction for the year, or apply the total number of miles driven through the year by the rate applicable for each of the above categories including business miles, charity miles, medical purpose miles and Moving miles.

Example: If you drove 1,000 miles for charity purposes, 1,000 miles for business purposes, 500 miles 4 medical reasons and 200 miles for moving purposes, your total mileage for the year will be 2700 miles.

If you are calculating the deductible miles for 2018, then the following will apply:

CategoryMiles drivenApplicable RateTotal deduction($)
Charity1,00014 cents140
Business1,00054.5 cents545
Medical50018 cents90
Moving20018 cents36
Total Deduction811

Safely store the records

The IRS recommends that you keep all your records for a period of between 3 to 7 years.

Typically, this is the window within which the IRS might conduct an audit, and you will, therefore, need sufficient records to substantiate mileage claims.

Besides, you will also need to contact your internal audit to ensure that you have been claiming the right amount of mileage deductions.

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