Essential Information About Claiming a Mileage Tax Deduction

Drive for business, charity, or medical appointments? This article will tell you how to benefit from mileage tax deductions.

CLAIMING A DEDUCTION for business mileage is a good method to save on money you owe Uncle Sam, but the government has tightened up the rules for mileage tax deductions in recent years.

The Tax Cuts and Jobs Act of 2017 eliminated itemized deductions for unreimbursed business expenses like mileage. The tax reform law also drastically narrowed the mileage tax deduction for moving expenses. Only active-duty military members who are relocating because of new orders are able to claim it. So, a mileage deduction happens only in certain situations.

Under the new tax code, you are able to claim a mileage deduction for:

• Business mileage for the self-employed.
• Mileage related to medical appointments.
• Mileage incurred while volunteering for a nonprofit.

You'd better know the rules for claiming your mileage tax reduction, and what's more, you need to carefully record it. Here's a breakdown of everything you need to know about mileage deductions.

Self-Employed Workers May Get the Highest Tax Reduction

Mentioning mileage tax deductions, self-employed people can possibly get the highest deduction rate and fewest restrictions. For 2021 tax filings, the self-employed are allowed to claim a 56-cent deduction per business mile. Those miles could be racked up from meetings with clients, travel to secondary work sites, or errands to pick up supplies.

Mileage for self-employed workers isn't subject to any threshold requirements either. That is to say, all miles are deductible no matter how much a person drives for work. If a person drives for both business and personal purposes, only miles driven for business can be deducted.

Self-employed workers can claim their mileage deduction on their Schedule C tax form instead of a Schedule A form for itemized deductions. In another way, they can claim their actual vehicle expenses for maintenance, repairs, and fuel. Taxpayers may want to calculate which option can have a higher deduction. 

Other expenses related to driving could be deducted as well. 

Itemize Your Deductions to Claim Medical and Charitable Mileage

Self-employed people aren't the only type of people who can enjoy mileage tax deductions, but everyone else will need to file a Schedule A and itemize their deductions if they want to get tax savings. People who do itemize may be able to exempt mileage for either medical care or charity work.

A medical deduction may include mileage that occurred when driving to and from doctor visits, the pharmacy, and the hospital. You can claim 16 cents per mile driven in 2021, but there's a threshold. 

Well, if you had significant medical expenses last year, it can be worthwhile to add up your annual mileage for doctor visits to boost your deduction amount.

As for the charitable milage, it is deductible as part of your charitable donations. The IRS allows volunteers to claim 14 cents per mile, but you have to be volunteering yourself. You can't be driving a child to a volunteer activity. There is no threshold requirement for claiming these miles.

The IRS Will Want to See Your Records

Please do not claim travel time you can't document although deducting mileage can save tax dollars. If you're audited, the IRS will want to see a log that includes dates, destinations, and the reason for travel. Travel logs should be detailed if you don't want to lose the deduction during an audit.

ZUS App is available that automatically detects travel and log of your every trip. Users can then categorize their drives by purpose and run reports to document deductions. Some apps have features to track mileage, but these may require users to manually input trip information. 

Those who didn't track their travel in 2021 may still be able to take mileage deductions when filing taxes this spring. However, in order to do that, you should prepare evidence of when and why you traveled, and there is no guarantee that IRS will accept documentation compiled after the fact. It's better to keep a log right at the beginning rather than risk a deduction being rejected during an audit.

Claiming mileage taxes reduction can be a relatively high amount of money for many people, but the IRS has specific rules regarding when and how it can be claimed. If you are not sure about the requirements for tax-deductible mileage, ask a tax professional to evaluate your situation.