Business Miles Deduction
By Michael Aston, E.A.
Alhambra Tax Center
With the new tax law and starting in the year 2018 -- deducting business miles on a Schedule-A has been eliminated. However, deducting business miles for sole proprietor or other business entity is still available.
Internal Revenue Code section 274(d) imposes relatively strict substantiation requirements for deductions claimed for listed property. Listed property includes any passenger automobile.
No mileage deduction is allowed without adequate records, or by sufficient evidence corroborating the: amount, time, place, and business purpose for each trip.
A recent court decision stated a taxpayer failed to submit any form of documentation -- such as mileage logs, odometer readings, diaries or trip sheets to substantiate the extent to which the vehicle was used for business purposes. The court ruled the taxpayer did not meet the substantial requirement and the deduction was limited. This taxpayer claimed 10,500 business miles and $800 for parking and highway-tolls. Since the taxpayer was unable to prove the miles claimed, the IRS only allowed 1,088 miles and no parking and toll fees.
If you have a smart phone…there are plenty of apps that will keep track of your business miles. Some are free, and some will charge a fee. Most apps will keep track of your trip starting time, ending time, and how many miles traveled.
If you’re an Uber or Lyft driver…it’s very important that you get an app that will keep track of your business expenses. What you pay for snacks and water are a deduction.
The Uber/Lyft year-end reports only show your business mileage after the you have been assigned a pick-up (and to the destination). So…make sure you maintain some type of records for your complete traveling time, not all of you miles will be on the Uber/Lyft report. You will be able to deduct your miles from the time you start your Uber/Lyft day until it ends.
If you would like to get more information about miles reports or the new tax laws that start in 2018, contact a tax preparer or go to www.irs.gov.