If you regularly travel to client sites, gather office supplies, attend conferences, or own multiple pass-through entities, you may be entitled to tax deductions or reimbursement from your employer. Any other business-related travel may be deducted by way of a mileage log—an efficient way to accurately track, measure, and record all business-related travel for proper analysis and relief.
There are two ways to take a deduction through different types of entities, which will reduce taxable income. For example, a physician who owns more than one practice and visits their two offices frequently is eligible for deductions on monthly premiums such as gas, tolls, bridges, insurance, maintenance repairs, etc. as well as the monthly payments for their car. In addition, established C-Corp organizations can reap the benefits of deductions on either leased or purchased vehicles, as long as the business mileage is properly filed and logged. Regardless of the type of entities, all parties above are considered deduction eligible.
To do this, each mileage and expense log must include the following information:
- The date of trip
- The destination (city, town, or area)
- The purpose of the trip (business or not)
- The odometer at the starting point
- The odometer at the stop point
- Other expenses including tolls, gas, or oil, etc.
Once you create a mileage log, it is important to identify which types of trip mileage are eligible for deduction. According to the IRS publication 463, most employees and self-employed persons can deduct the cost of driving and maintaining their car. Eligible deductions include but are not limited to travel from one workplace to another during business hours, client visitation, or attending business meetings away from your regular workplace.
Using the physician’s example from above, if they use their car strictly for business, they can deduct mileage from all trips. However, if they use the car for both personal and business matters, they must clearly demonstrate a separation within a logbook and only claim mileage on business-related trips.
It is imperative that all business owners, independent contractors, physicians, and drivers all have an efficient mileage log strategy in place, to maintain orderly reporting for the annual tax seasons. Using the above knowledge will help taxpayers continually anticipate annual reporting needs and minimize tax season stressors.
For more information or questions involving logbooks and templates contact us.
We highly recommend you confer with your Miller Kaplan advisor to understand your specific situation and how this may impact you.