If you’re a mobile notary, you’ve probably wondered whether your gas mileage is tax deductible. The answer is yes, but you must be careful to follow the applicable rules, keep good records, and choose the best deduction method.
1. Know the Rules
Federal and state tax regulations both apply, and you should be aware of both. For federal taxes, the IRS provides information in Publication 463: Travel, Entertainment, Gift, and Car Expenses and Topic 510 – Business Use of Car. For state regulations, check with your individual state publications or representatives, or talk to your tax consultant.
The IRS specifies that if you use your car only for business, you can deduct all associated expenses (under certain restrictions discussed more fully in the publications referenced above). Otherwise, if you use your car for both personal and business use, you can only deduct business-related expenses. In the latter case, you can use one of two methods to calculate your deduction: the standard mileage rate method and the actual expenses method, described in more detail below and more complete in the referenced IRS publications.
Briefly, the standard mileage rate is based on mileage, uses a variable annual rate, and requires less paperwork; while the actual expenses method allows you to deduct other car-related expenses, is based on the percentage of time you use your car for business, and requires more paperwork. Ideally you should calculate using both methods to see which gives you a greater deduction.
The standard mileage rate varies annually. You can find the current rate in Publication 463: Travel, Entertainment, Gift, and Car Expenses. For the official announcement of the 2010 rate, see “IRS Announces 2010 Standard Mileage Rates”.
2. Keep Good Records
Both for calculations and for auditing, you should keep good records. Relevant records include:
- A record of how much you use your car for business purposes, in the form of a mileage log that records where you went, the business purpose of your trip, and how many miles you traveled. NotaryCRM software helps you automate tracking of this information, though it does not directly perform tax calculations.
- Receipts for car-related expenses, including gas, repairs, parking, and tolls.
You should maintain these records up to ten years in case you are audited.
3. Choose the Best Deduction Method
You should calculate your deductions using both methods, and then compare the results:
- Standard Mileage Rate Method: Add up how many business miles you drove during the year, and multiply them by the standard mileage rate for that year. The rate varies annually. You can find the current rate in Publication 463: Travel, Entertainment, Gift, and Car Expenses. If you use the standard mileage rate, you can add to your deduction any parking fees and tolls incurred for business purposes.
- Actual Expenses Method: Add up all the costs of owning and operating your car, including gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments). Divide the total by the percentage of time you use your car for business purposes. You can further subtract parking fees and tolls attributable to business use.
For the specific details about how to calculate using these methods, consult an official publication or your tax consultant.
After calculating using both methods, compare the results to see which deduction will save you more money on taxes, taking into account any situational regulations.
For more information, consult the referenced IRS publications or your tax consultant. NotaryCRM does not render tax advice and provides this summary for your convenience, for information only. We hope it helps save you some time and money. Don’t forget to use NotaryCRM to track your mileage!