Is it your first time being self-employed? Have you just started your own company? If you have answered yes, do you know that your car related business expenses can be deducted from tax provided that you keep the mileage log? With our mileage tax deduction guide for the self-employed you don’t have to worry about it.
What can self-employed people deduct on their taxes?
As an independent contractor, you need to keep track of your mileage. To do it in a proper way, you have to know what expenses are tax deductible.
A self-employed individual can write off mileage tax deduction expenses related to his or her business. For example, driving to and from work is not treated as one, while going to a lunch with your client belongs to the common tax deductions.
A car depreciation, one of the self-employment tax deductions, means the decrease of the car’s value, due to the mileage, age, wear and tear. There is another quite obvious claim on taxes – the cost of gasoline and oil. Keeping track of mileage is one of the most important parts of a mileage logbook.
Car-related write-offs
When you want to write off business expenses, don’t forget about other car-related expenses.
To drive your car on business, you’re obliged to pay insurance premiums, car registrations fees, and licensing fees. The costs of repairs and servicing, or new tires count as car-related write-offs too.
You may also write off a car for business after the purchase of a vehicle for business purposes.
Mileage tax deduction for self-employed
There are two ways of mileage tax deduction for self-employed. Most of the people choose the standard mileage rate, set by the IRS each year. In the first half of 2022, the rate is 58.5 cents per mile driven, and 62.5 cents in the second half.
The actual expense method is better for the drivers who have more expenses related to the maintenance, for example servicing, than to mileage. The method requires you to collect all the receipts being the proof of the costs borne.
Mileage tracking methods, MileageWise
Mileage tracking methods include pen-and-paper, Excel or Google Spreadsheet, and the most effective one, a mileage tracking app, such as MileageWise.
Using MileageWise means you can expect an average of $12,000 mileage tax deduction for 1 tax year. If you forget to track your mileage, it will help you recreate your past mileage. Thanks to VIP mileage log preparation service the log will be created for you.
In addition to three automatic tracking modes, the mileage log is 100% IRS-approved. Try MileageWise for 14 days for free to find out why it’s so effective.