You probably already know that you can deduct mileage as a business expense. But did you know that, if you work from home, all mileage related to your freelancing is deductible? That can put a lot of money back into your wallet, and may even cancel out what you spend on gasoline each year.
If your workplace is not in your home, the mileage between home and office is considered commuting, and is not deductible as a business expense. But the miles you drive from your workplace to and from other business-related locations is fully deductible as a business expense. That can still put quite a bit of money back in your pocket.
If your studio or office is in your home, you have no commute. All business-related mileage is fully deductible.
Currently, the rate set by the IRS is 57.5¢ per mile. If you travel 10 miles from your place of business to another location for a business purpose, and travel 10 miles back, that’s 20 miles of business related travel, Your deduction is $11.50 for the round trip.
To deduct mileage costs, you need to keep records
Business-related purposes include: buying office equipment, supplies, client meetings, research, education, advertising, professional development, meeting with your vendors, meeting with your attorney or accountant for business purposes, trade association meetings, bank transactions, and more.
To deduct it, put it in writing.
To deduct mileage costs, you need to keep records. In fact, the Schedule C actually asks if you keep a written record. Mileage is one of the most-audited deductions for small businesses. But it is one that can save you a lot of money.
Want another reason to keep mileage records? The percentage that you use your car for businesses purposes is the same percentage you can allow for car-related expenses, including insurance, interest on auto loans, fees, auto lease or purchase, parking, tolls, gasoline, upkeep and maintenance. For example, if 55% of your annual mileage is business-related, you can deduct 55% of your auto-retated expenses for business purposes in addition to the mileage itself. It pays to keep good records.
If your studio is away from home, reduce your commuting miles by making business stops on the way to work. For example, you need to buy inks for your desktop printer. Best Buy is 3.2 miles from your front door, and your office is 12.7 miles from your front door. Stop at Best Buy, and then proceed to your office. The mileage between Best Buy and your office is now deductible. You can do the same in reverse when returning home at the end of the day.
You can turn personal miles into business miles by doing business-related activities near non-related ones. If you need to go to Home Depot, go to a nearby Office Depot as well. You can deduct the mileage as business-related. Yes, it’s that easy. But, plan well, be sure you’re being legitimate about it, and are keeping accurate records.
An accurate mileage record includes:
- Date of the trip
- Total mileage from office to location (or location to location)
- Total mileage from location to office
- Reason for the trip
- Who you met with, if appropriate
- What you talked about (in general terms.)
How to keep mileage records
Keeping track is best done in real time. Get a notebook or app. Get into the habit of recording your mileage every time you start and stop your car. Record your odometer mileage at the beginning and end of each year to get the total miles traveled in order to figure out the business use percentage. These are some options for record keeping:
- Notebook and pen
- Mileage record book
- Mileage record smartphone app (MileBug, TaxBot)
- Spreadsheet smartphone app (Numbers, Excel)
Be sure you are tracking miles in consistent units. If you prefer kilometers., that works, but don’t switch back and forth between miles and kilometers in your record keeping.
If you use more than one vehicle for business, keep records for both.
Talk with an accountant or tax attorney about business-related activities and expense deductions accepted for your professional field, and start keeping track of your mileage.
DISCLAIMER: This information is offered in good faith for general information purposes only and is not exhaustive. It is not intended as legal advice or opinion. I do not make any warranty about the completeness, reliability, or accuracy of this information. Any action you take based upon this information is strictly at your own risk. I am not liable for losses and damages in connection with the use of this information. You should seek legal and other professional advice when establishing a freelance business.