There are times when you will need to travel for business. Whether you run your own business or you are working for someone else and need to travel, you may be able to deduct some of the expenses that this travel incurs when you are on the road. Keep in mind that if you are an employee who is traveling and your employer reimburses you for this travel, you will not be able to claim the deduction. But if you have to come up with the expenses out of your own pocket, your tax professional will be able to help you get the most money back at the end of the year for this expense.
There are two main ways that you will be able to deduct your travel expenses. The one that you chose will vary based on how much you would like to save in addition to how well you kept track of those receipts through the year. If you are interested in saving some money at the end of the year on your tax return and you had to pay some out of pocket expenses for your travels, make sure to talk to your tax professional right away.
Simple Deduction
Many people who use their vehicles for business purposes will simple use this simple deduction. The simple deduction is easy. It doesn’t require a lot of receipts, although it is still a good idea to keep a few of those on you just in case the IRS would like to check. You just need these receipts as well as some of the mileage that you put on the vehicle and you are set to go.
For this deduction, you will just need to take the number of miles that you drove the vehicle for business purposes and times by the rate that the IRS sets out. This rate does vary based on inflation each year so make sure to check and see where it is at before using on your tax return. Once these are multiplied together, you can put that number into your tax return and move on to the next thing.
While this deduction is pretty simple to follow, it is not the one that will save you the most money at the end of the year. If you would like to save more on taxes each year, you should consider the itemized deduction. But if you are in a hurry, don’t have all the receipts that you should, or you just want to get the deductions done with, the simple deduction can work well for you. Make sure to talk to your tax professional before getting started to ensure that you are claiming the right kind of miles in order to qualify for this kind of deduction.
Itemized Deduction
The itemized deduction is going to take a bit longer compared to the other one, but it could save you a lot of money in the process. If you had to travel a lot for your job and also spent some extra on repairs and maintenance of your vehicle during this time, the itemized deduction may be more helpful to your cause.
With this deduction, you are going to claim all of the expenses that you incur throughout the year that relate to traveling. You will keep track of how many miles that you drove in addition to how much gas cost for each trip. If you take the vehicle in to a mechanic, you will be able to deduct some of these costs as well. The trick here is to keep good records through the year. If you don’t have the receipts to prove the costs that you claim, you will not be allowed to claim them. But with the right record keeping in place, you will find that this deduction can save you a lot of money.
There are a few things to keep in mind with this though. First, you are not able to claim any of this if your employer reimburses you for the money. The employer will be able to claim some of these expenses, but you have already been paid back and are not allowed to claim these again. Trying to do so could get you into a lot of trouble with the IRS.
In addition, if you use that vehicle partly for personal use and partly for business use, do not try and claim all of your mileage and gas costs, as well as maintenance for the whole year on the tax return. You are only allowed to claim the amount that was used for business purposes. The key here is to figure out how much you used the vehicle for personal use and how much for business and then divide up the costs that way. Your tax professional will be able to assist you in doing this process so you can get the best results in no time.
Hiring a tax professional during tax season can make a big difference in how well your tax return gets done. Some people feel that they can handle it on their own, but often they miss out on a lot of important deductions that could save them on their tax bill. Contact our offices today to speak with a tax professional and to get started on the best tax return possible this year.
Larry Gurewitz