Driving for Business in 2011
by BarbaraWeltman, Guest Blogger
- Created: December 9, 2010, 7:17 am
If, like most small business owners, you use your personal car for business, be sure to follow tax rules so yo;ll get the biggest write-off yo-re entitled to.
There are two ways in which to figure the deduction of your business driving costs: track the actual expenses for use of your car on business or rely on a standard mileage rate fixed annually by the IRS.
Standard mileage rate
The standard mileage rate is fixed each year by the IRS and relieves you of the chore of keeping receipts for car-related expenses. This rate takes the place of deducting the cost of gasoline, oil, repairs, lease payments (if you lease), depreciation (if you own), and other car-related expenses.
The standard mileage rate for 2011 has been set by the IRS at 51¢ per mile. Thus, if you drive 20,000 miles for business in 2011, your deduction for business use of your car will be $10,200.
If the cost of gasoline rises substantially during 2011, the IRS might issue a second rate for a portion of the year, as it did in 2008. You may recall that in 2008, there was one rate for the first half of the year and another rate for the second half of the year.
In order to maximize your deduction for driving, yo-ll need to retain receipts for car-related expenses so that, when you file your return, you can opt to use the standard mileage rate or the actual expense method.
Note: Whether you deduct driving costs using the standard mileage rate or actual expense method, you can also separately deduct parking fees and tolls.
Regardless of which method you opt to use, be sure to maintain a record of your business driving. The record should be made at the time of each business trip and indicate the date of each trip, the odometer reading, the purpose of the trip, and the destination. Start the new year off right by recording your odometer reading and maintaining records faithfully throughout the year.
How to keep a record for tax purposes:
- Keep a log book and pen handy to note your driving information each time you use your car for a business trip.
- Use an App, such as *Tap2Track Mileage from Intuit or *Milog from SimplySoft, to create a record.
Ther's a shortcut for recordkeeping, called'sampling' that is buried within IRS regulations (scroll down to'samplin'). The regulations permit you to use a sampling of your driving for a period of the year to extrapolate your annual driving. For example, you can keep a record of all your driving for three months of the year and then multiply your mileage by four to determine your annual driving. Sampling is allowed only if the driving during the sample period is representative of your driving for the entire year; sampling cannot be used if you cannot show a consistent pattern of car use for business.
What is business driving?
Obviously, when you travel from your office to see a customer or vendor, this constitutes business driving. Whether travel from your home to another location is a business trip depends. If you commute from home to your office (and back), this is a nondeductible personal expense. If, however, you work from a home office for which you claim a tax deduction, then travel from home to any business location (and back) is treated as deductible business driving.
Do't overlook certain trips that can be viewed as business driving, including travel to the bank to make business deposits, to the post office to mail business packages, or to the office supply company to purchase business supplies.
For more on business driving, see IRS Publication 463, Travel, Entertainment, Gifts, and Car Expenses. While a 2011 update is not yet available, the general rules on business driving and substantiation requirements continue to apply.
*denotes a non-government Web site
Barbara Weltman is an attorney, author of several business books including J.K. Lasse's Small Business Taxes, and trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and her monthly e-newsletter Big Ideas for Small Business®; both are available at www.barbaraweltman.com, and host of Build Your Business Radio. Follow her on Twitter at twitter.com/BarbaraWeltman.
About the Author
Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BarbaraWeltman.
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