So, you have a small business and your tax professional is trying to help you get organized so that going forward you will both have an easier time with the deductions. As nearly everyone knows, the standard mileage deduction is generally much better when calculating automobile expenses than are actual expenses. To illustrate how the mileage deduction is better, I’ll use a hypothetical example.
Your vehicle gets 25 miles per gallon (this is a hypothetical example, obviously I don’t know how much mileage your vehicle actually gets), gasoline is $2.00 a gallon (no, neither do I know how much gasoline is going to cost on the day you read this, again, it is a hypothetical) and you drive 200 miles one day to visit a customer. With the ‘actual expenses’ method, you would have incurred an ‘expense’ of $16 – 200 miles divided by 25 miles per gallon, times $2 per gallon. With the mileage deduction, 57.5 cents per mile in 2015, your ‘expense’ would have been $115 – let’s see – when you are trying to lower your business income, having an extra $99 ($115 – $16) in deductions is a good thing. If you are in the 15% tax bracket, the mileage deduction would have saved you about $15 – or just $1 less than the total expense using the actual expenses method.
But, you think, if i use the mileage deduction method I have to keep track of all those trips, all that mileage, I hate bookkeeping, etc, etc. Well, have I got something for you!! I just saw an ad on my phone (don’t you just hate those things?) for an app called MileIQ. I get nothing for you downloading it, this is to help you out, and my hope is that by giving you this totally cool information you may consider coming here to get your taxes done. Now, a couple caveats: first, I have not used this app – since I don’t drive for my business it would be of absolutely no use to me – so I am going off the description and the excellent reviews it has received. Second, while it IS free to download, if you make more than 40 business ‘trips’ a month, using it is not free – it costs $5.99 a month or $59 a year – I’m not going to go into all the things it says it does since I’m a tax geek and not a salesman for their app. If you are interested in saving a bunch of record keeping for yourself and still getting the best tax deduction for your business trips, look for it in the Google store or Apple store. Try it – if it looks easy to use and you think it will help you, think about the post that turned you on to it and how I told you to save a bunch on your income taxes. Hope to see you this tax season