If you have used or plan to use your vehicle for business, charitable, medical, or moving (BCMM) purposes, you may qualify to claim expenses for your vehicle. Taxpayers have two available options: 1) Actual Method– track all of your vehicle expenses, such as fuel, insurance, repairs, etc. and keep all receipts related to these expenses . You are allowed to deduct actual expense based on the ratio of BCMM miles to total miles or 2) Mileage Method– track your BCMM mileage and multiply that by the appropriate IRS approved mileage rate. If you choose to use the mileage method, the rates change every year and typically are announced in late December for the upcoming year. The IRS also requires written records of the mileage in order for you to claim a deduction using either method.
If you are using your vehicle for business purposes, you may deduct 53.5 cents per qualified, unreimbursed business mile for 2017. This will be for mileage incurred for business purposes, such as errands to pick up business supplies, mileage for going from one job or job location to another in the same day, or visiting customers. The mileage must have a business purpose. However, commuting from your tax home to your work location is not deductible mileage.
If you are a business owner reimbursing employees for mileage you can reimburse them at the current rate (or less, if you choose). If you choose to reimburse at a rate higher than the standard rate, then the excess mileage amount should be included in your employees’ W-2 as a taxable fringe benefit.
If you are using your vehicle for charitable purposes, you may deduct 14 cents per mile for 2017 for each qualifying, unreimbursed mile incurred on behalf of the qualified charitable organization. To qualify, there cannot be a significant element of personal pleasure, recreation, or vacation in the travel. The mileage must be directly connected with the volunteer service(s) you performed if you are reimbursed for your mileage at a rate greater than 14 cents per mile, the difference should be reported as income on your personal income tax return. As an example, if the charity were to reimburse you at the rate of 20 cents per mile, then 6 cents per mile would be added as income on your personal income tax return. On the other hand, if you were reimbursed 10 cents per mile, then your deduction would be 4 cents per mile.
If you are a representative of a qualified charity that chooses to reimburse its volunteers, you should do so at the standard rate. You are not responsible for issuing any 1099 to report reimbursed expenses. We do highly recommend that you have the volunteer submit written records for reimbursement.
If you use your vehicle in connection with medical or moving miles, then you may deduct 17 cents per mile for each qualifying, unreimbursed mile incurred for 2017. To qualify, medical mileage must be incurred primarily for, and essential to, medical care for you and your spouse, as well as those you claim as qualifying children or qualifying relatives. Moving expense mileage is allowed for each car driven from your former home to your new home (1 one-way trip each), provided you meet all the tests for claiming moving expenses.
The above summary is a brief overview of the different mileage rates available. The rules governing the ability to claim deductions for mileage can be quite complex, depending on your tax situation. For further, in-depth discussions regarding this information, please contact one of our qualified professionals at Ketel Thorstenson, LLP.