Watching races, thinking about deducting business miles
Sunday, May 26, 2013
Although I am glued to my couch today, autos are still a major component of this Sunday.
The Sunday of the annual Memorial Day weekend is gearhead nirvana. There are three major car races today. Don't worry, race fans, no spoilers here!
It starts early, 6:30 a.m. here in the Central time zone, with the Formula 1 race from Monte Carlo. I love F1 racing, but I must admit that I watch these land-based rockets maneuver the twists of Monaco as much for the scenery as for the race itself.
Grandstands set up in front of Monaco harbor await spectators of the Formula 1 race through the principality's streets. Photo by AmyMaria via photopin/Flickr cc.
Then there's the Great American Race, the Indianapolis 500. Infighting between fools in the open-wheel circuit years ago diminished this race a bit, but it's getting back to its rightful glory thanks to a unified Indy Car governing body, some great and personable drivers and some fantastic races.
If you didn't see the Sao Paulo 300 earlier this month, find a tape. It was one of the best races in any series I've seen and I've been watching all sorts of racing for almost 30 years.
Then hardcore motorheads wrap up the day with the World 600. Yes, I know that NASCAR's longest race of the year down at Charlotte Motor Speedway has a corporate sponsor name now, but I like the grandiosity of "World" tag.
The fendered car drivers start their engines just after 6 p.m. Eastern/5 p.m. Central, with the green flag scheduled to drop at 6:16/5:16 p.m. It will be well after dark when the winner celebrates in Victory Lane.
Deducting business mileage: Tax geeks who have stuck with me so far might be wondering, what's any of this got to do with taxes? I'm glad you asked.When some of us return to work after this three-day weekend, we'll use our cars for business purposes. And we might be able to claim some of that road travel as a deductible business expense.
This deduction typically is claimed by self-employed taxpayers. When you work for someone else and must travel for that job, you generally submit your travel expenses to your boss for reimbursement. But if your employer won't pay the eligible travel costs, or not all of them, then you might be able to claim them as a deduction at tax time.
Regardless of your situation, if you use your car for business purposes you get the option of figuring your deductible expenses by using the standard mileage rate or by claiming actual car expenses.
Actual car expenses include gas, oil, insurance, garage rent, registration fees, tires, repairs, tolls and parking fees.
A lot of folks choose the standard route, which factors in many of the actual costs into the final mileage rate, because it's usually easier. Plus, you still get to add your parking fees and tolls to your vehicle's business travel cost total even when you use the standard mileage rate.
The Internal Revenue Service issues an annual update of the mileage rates based on inflation. For 2013, business miles are worth 56.5 cents per mile. That rate also is this week's By the Numbers figure.
Claiming the miles: If you're employee claiming unreimbursed auto business travel, you'll report your car-related expenses on Part II of Form 2106, Employee Business Expenses.
This form is filed along with your 1040 and Schedule A, Itemized Expenses. The info on 2106 is transferred to line 21 of Schedule A.
Note, your unreimbursed employee mileage is part of the miscellaneous itemized deductions category. And before you can deduct these, they must amount to more than 2 percent of your adjusted gross income. Once you clear that threshold, only the amount in excess of the 2 percent cut-off counts.
If, however, you're self-employed, your business mileage is reported on Schedule C. This applies whether you are your own boss as your main source of income or you simply have a weekend job to add to your salaried income.
Qualifying miles: To ensure that the IRS doesn't have any problem with your mileage deductions, make sure you follow the rules.
You must own or lease the car you use for business.
If you use the car for both business and personal travel, you must break out the mileage used for business regardless of which method, actual expenses or standard mileage rate, you use. In actual auto expenses cases, prorate the expenses based on mileage and deduct only the portion attributable to business.
When you claim the standard rate, make sure you've get accurate track of your business miles. I like to zero out my trip odometer every time I pull into my garage so I have a clean slate for my next business trip. There also are some mileage tracking apps if you have a smartphone.
Make sure your miles were necessary. That is, the miles for a side trip to the grocery store to pick up milk for home as you're returning from a meeting with a client don't count.
I'm not planning to get back into my car for a business or personal trip for a few days, and definitely not this Sunday. But when I do head out for a business meeting, I'll definitely track those miles. You should, too. It could help cut your coming tax bill.
You also might find these items of interest:
Comments