Don't overlook these!
|Reason Vehicle Used||Jan. through June||July through Dec.|
|Business||51 cpm||55.5 cpm|
|Medical||19 cpm||23.5 cpm|
|Moving||19 cpm||23.5 cpm|
|Charitable||14 cpm||14 cpm|
If you're self-employed, used your vehicle for business during 2011, and paid interest on a loan for that vehicle during 2011, the interest is deductible. This is an additional deduction over and above the IRS mileage allowance.
If your were an employee, sorry, you don't get to deduct car loan interest, even if you used your vehicle 100% for your job.
How to Deduct the Interest:
Simply add the interest you paid on your vehicle loan during 2011 to your total your mileage allowance (or to your actual operating expenses, if you're claiming actual expenses instead instead of the mileage allowance). Enter your total deduction on Schedule C, line 9.
If you used your vehicle for both business and personal purposes, you may only deduct the portion of the total deduction that relates to business use.
The mileage allowance takes into account the vehicle's operating expenses such as gas, oil changes, repairs, etc. as well as depreciation. It does not take into account tolls, parking fees, or towing charges. However, they are deductible.
In the above example, had you paid tolls, parking fees, or towing charges during 2011, you would have added them to your mileage allowance along with the interest on the car loan and deducted the total, minus the personal use portion (20%), on Schedule C, line 9.
The IRS does not allow you to deduct miles traveled between your home and your place of business. Such mileage is called commuting mileage and it is a nondeductible personal expense. This rule applies to self-employed people as well as employees of a business.
However, if you're self-employed and operate your business from a separate location away from your home, there is a loophole that will allow you to convert your miles traveled between your home and your business location. (You deduct car and truck expenses on Schedule C, line 9)
Here's the loophole:
To deduct transportation from your home to your place of business and back home, you must satisfy BOTH of the following:
Any miles traveled between TWO or more BUSINESS locations are deductible business miles.
Here's the key:
The IRS Considers the Following as Business Locations:
Your home office will qualify as a business location if it is used regularly and exclusively for business and not for personal purposes (i.e., no entertaining guests in this location).
Your home office may be a room in your house or designated space in an apartment or condo, such as your bedroom or living room, where you perform administrative duties, such as bookkeeping, billing, setting appointments, business planning, preparing reports, emailing clients, filing papers, etc.
TIP: If you don't currently have a home office in your house or apartment, set one up. All you need is a desk, chair, and file cabinet. Your cell phone could be your business phone.
If you have a house, use a separate room. If you rent an apartment, designate an area in your bedroom, kitchen, or living room to be used regularly and exclusively for business-related purposes.
If questioned by the IRS about whether you or your kids use the computer in your "office" to play games, answering "yes" may disqualify the space as a business location, and therefore, the cost of traveling between your home and your business may be disallowed.
A Location Outside Your Home.
Your other business location may be outside your home where you meet clients or customers to transact business.
For example, you may have a facility where you perform some type of service such as physical therapy, accounting, legal or paralegal services. Or, perhaps you have a retail store where you sell products or a restaurant where you serve customers.
Since your home office and your other business facility are two separate business locations, you satisfy rule #2:
The first rule is:
Technicalities you should be aware of:
Let's say you get up in the morning and dash out of the house to go to your place of business. You never bother to step foot into your home office to do any work before leaving the house (e.g., checking your emails or filing some papers or whatever).
Technically, the cost of traveling between your home and your business would not be deductible.
Since you never stepped foot into your home office before leaving for work, you didn't actually travel between two business locations. Yes, I know; who would know. Nevertheless, those are the rules.
Remember the rule: You must travel between two or more business locations to get a deduction for the costs of such travel. Your home office is a business location, not the other rooms in your house!
In addition, you must comply with the regular and exclusive rule too, which you will if you use your office for adminstravtive work for your business (i.e. bookkeeping, preparing finanacial reports, making sales calls, filing paperwork, issuing invoices, etc.).
Besides simply having an office in your home and a separate location where you conduct your business, as previously discussed, your home may itself be your primary place of business, and therefore, travel from your home and back again for business-related purposes are deductible. For example, to pick up supplies for your business or to stop in on clients.
If you're an employee and have two or more jobs, you may claim a mileage allowance for miles traveled between job locations only. The deduction is claimed as a miscellaneous itemized deduction on Schedule A and, when added to any other miscellaneous deductions, if any, is subject to the 2% adjusted gross income floor.
For example, if you work at two separate job locations, A and B, the miles traveled between locations A and B are deductible. However, miles traveled between your residence and locations A and B are nondeductible commuting mileage.
Copyright © 2008-2012 Larry Villano. All rights reserved.