Driving down your tax bill with auto-related deductions
Sunday, February 21, 2016
One of my favorite faux inspirational sayings suggests a way to deal with stress, which is a major issue for many folks at tax time.
"When life is stressful, do something to lift your spirits. Go for a drive. Go two or three thousand miles away. Maybe change your name."
It actually works, the taking a short drive, I mean. Thankfully, neither my taxes nor the rest of my life has gotten so overwhelming (yet!) that I've been tempted to follow the rest of the tongue-in-cheek advice.
And in addition to the mental and emotional relief, some of the driving I do actually provides a tax break.
Tax-saving driving: Here are some ways your mileage could pay off for you, too, at tax time.
If you hit the road to help out your favorite charity, track those miles. If you itemize instead of claiming the standard deduction, you can claim the mileage as a donation on your Form 1040's accompanying Schedule A.
Did you move to take a new job? Be sure to include those relocation miles on Form 3903 and then transfer the moving tally to line 26 in the above-the-line deductions section of the long Form 1040.
Not feeling well? So sorry. But the good news is that your trip to the doctor could help improve your tax bill as well as your health.
Deductible medical costs include things like travel costs to get to and from treatments and even trips to your local pharmacy to pick up the medications your doctor prescribed. Like the charity write-off, medical mileage amounts are itemized on Schedule A.
Finally, there's the deduction for business miles. This is the biggest travel-related deduction that I, as a self-employed taxpayer, claim each year.
I jot down ever mile I drive to and from business meetings, office supply stores, the post office when I snail mail items to clients and to the coffee shops and restaurants where I meet with folks to discuss how we can work together. I get a nice business mileage bonus when my work-related journeys take me driving instead of flying distance out of town.
You can claim either actual business-related auto expenses or the standard mileage deduction for work-related driving. I opt for the standard mileage rate that the Internal Revenue Service adjusts each year as inflation dictates.
For 2016, low inflation means that the business miles standard rate dropped from the 57.5 cents per mile I'll claim on my 2015 tax return to 54 cents per mile.
The medical and moving rates are reset each year, too. This year they also are reduced, going from 23 cents per mile in 2015 to 19 cents per mile in 2016.
UPDATE, July 1, 2017: For 2017, low inflation means that the business mileage standard rate dropped again at the start of the year, going from 54 cents per mile to 53.5 cents per mile.
The medical and moving rates are reset each year, too. For 2017, they also are reduced, going from 19 cents last year to 17 cents in 2017.
The charity mileage deduction rate, however, is set by Congress and not adjusted for inflation. It's still stuck at a paltry 14 cents per mile.
Weekly round-up of daily tax tips: These standard mileage deduction rates were one of last week's Daily Tax Tips. It showed up last Wednesday, sandwiched by four other weekday pieces of filing advice between Feb. 15 and Feb. 19.
- Sales tax deduction (Monday, Feb. 15, 2016)
- Alimony payments have tax implications (Tuesday, Feb. 16, 2016)
- Standard mileage inflation adjustments (Wednesday, Feb. 17, 2016)
- Wash sale warning (Thursday, Feb. 18, 2016)
- Child and additional child tax credits (Friday, Feb. 19, 2016)
Stay tuned. Five more tips will be posted next week in the upper right corner of the ol' blog's home page.
If you miss a day, there's always the weekly review. Or if you don't want to wait, you can go to the special pages -- the January one is complete; February is still growing -- for details.
The tips should help you take good tax care when filing your 2015 return or planning for 2016 taxes.
And be careful when you get behind the wheel, whether for tax-related or purely personal purposes. You definitely don't want business (or charity or moving) miles to collide with medically deductible driving.
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