Small amounts of people know that some trips made with their cars, such as state registered charity trips or business trips are tax deductible. It is important to know which trips count as tax deductibles, as tax deductibles are important to individuals who are on a tight budget. Cars used for business is a tax deductible. This piece of information will come in handy if you have two offices or own a small business.
Here are the steps to calculate mileage accumulated by your car to reduce for taxes:
- Note the beginning mileage. The beginning mileage is the mileage indicated in your car at the beginning of the year. Tax deductible for mileage starts at January 1. Write down the mileage of your car at that date. This mileage is the number to deduct from the end mileage.
- Know what deductibles are. There are guidelines for what you can and cannot deduct from taxes. For instance, if you have one office, the mileage accumulated going to that office is tax deductible. If you have two offices, then the mileage accumulated travelling from office to office is tax deductible. There are plenty of lists available over the Internet that list all the tax deductibles that apply to mileage. Find out what applies to you and the deductible rate.
- Keep careful track of car usage. If you use your vehicle solely for business, then the miles accumulated by your vehicle for going to work is tax deductible. Keep track of the mileage in your vehicle for work by listing down the mileage every month.
- Add all the mileage used for the year. Tax deductible for mileage ends at December 31. Add all the mileage accumulated from January 1 to December 31. You will need this number for the calculation.
- Subtract the beginning mileage with the accumulated mileage of the year. Take the beginning mileage from January 1 and subtract it from the mileage you accumulated using your vehicle for the tax-deductible purpose from December 31. The number that appears after you subtract the beginning mileage with the mileage taken down at December 31 is your tax-deductible mileage.
- Multiply the tax-deductible mileage by the allowable deduction of the year. Deductible rates might vary from year to year. It is important to know the deductible rate for vehicles for the year you are applying the tax deductible. If the deductible rate is $.55, multiply the mileage by .55. The resulting number is your mileage for taxes.
Following the steps listed above will give you a number that you can apply for tax deduction. Tax deductibles are a big help, sometimes an absolute necessity to save money and spend it on other things you need to spend on, such as house expenses and business expansion. The tax deductible you get from mileage, depending on how often you use your car, might deduct a large amount from your taxes. Keep in mind that there are exemptions to the tax mileage. Certain business trips in your automobile might not count as a tax deductible. The best way to know is to do your research and know the deductible rates for every year you are applying for mileage tax-deductibles.