Can I Write Off My Mileage In 2018? A Comprehensive Guide to Mileage Deductions

Navigating the world of taxes can often feel like wandering through a maze. One area that frequently causes confusion, especially for freelancers, small business owners, and even employees, is mileage deductions. If you’re wondering, “Can I write off my mileage in 2018?” then you’re in the right place. This article will provide a comprehensive look at mileage deductions for 2018, helping you understand the rules, requirements, and how to maximize your potential savings.

Understanding the Basics: What is a Mileage Deduction?

At its core, a mileage deduction allows you to deduct the costs associated with using your vehicle for business purposes. Instead of tracking and calculating every single expense related to your car (gas, maintenance, insurance, etc.), the IRS allows you to use a standard mileage rate. This rate is calculated annually and is intended to cover the operating costs of your vehicle. The beauty of this system is its simplicity: you just need to track your business mileage.

Who Qualifies for a Mileage Deduction?

Not everyone can claim a mileage deduction. Generally, you need to be using your vehicle for work-related purposes. This includes:

  • Self-Employed Individuals: Freelancers, consultants, and small business owners can often deduct mileage for trips to meet clients, run errands related to their business, or travel between business locations.
  • Employees (with limitations): While the rules changed significantly after 2017 (more on that later), some employees could deduct unreimbursed business expenses, including mileage, if they itemized deductions.
  • Specific Situations: There are other specific situations where mileage may be deductible, such as moving for a new job (subject to certain conditions) or using your vehicle for medical purposes.

The Standard Mileage Rates for 2018

For 2018, the IRS established the following standard mileage rates:

  • Business Use: 54.5 cents per mile
  • Medical Use: 18 cents per mile
  • Moving (for eligible taxpayers): 18 cents per mile

It’s essential to remember these are the rates you would use to calculate your deduction, assuming you meet the eligibility requirements.

Keeping Accurate Records: The Key to a Successful Deduction

Meticulous record-keeping is non-negotiable. The IRS requires you to substantiate your mileage deductions. This means you need to keep detailed records of your business-related trips. Here’s what you should track:

  • Date of the trip: This helps to establish the time frame of the expenses.
  • Destination: Where did you go? Be specific.
  • Purpose of the trip: Why did you travel? Was it to meet a client, deliver goods, or attend a conference?
  • Miles driven: Record the actual mileage for each trip. Use your odometer readings at the beginning and end of the trip, or a GPS app.
  • Total miles for the year: Calculate the total business miles driven for the entire year.

Software or apps can be hugely helpful here. Many apps are specifically designed for mileage tracking, making it easier to maintain accurate records throughout the year.

What Expenses Are NOT Included in the Standard Mileage Rate?

While the standard mileage rate covers a broad range of vehicle operating expenses, there are some expenses you can’t deduct separately if you use the standard mileage method. These are the things already factored into the rate:

  • Gasoline/Fuel: This is a significant component of the standard rate.
  • Oil Changes: Routine maintenance is considered within the rate.
  • Depreciation: The wear and tear on your vehicle is accounted for.
  • Insurance: Vehicle insurance costs are included.
  • Repairs and Maintenance: General upkeep is covered.

Choosing Between the Standard Mileage Rate and Actual Expenses

You have a choice: either use the standard mileage rate or deduct your actual vehicle expenses. This is a crucial decision, and it’s best to consider these factors:

  • The Standard Mileage Rate: This is the simpler option, requiring less detailed record-keeping. It’s often a good choice if your vehicle is relatively new or if your actual operating costs are average.
  • Actual Expenses: This involves tracking all your vehicle expenses (gas, repairs, insurance, etc.) and deducting a percentage based on your business use. This can be beneficial if you have high vehicle expenses or a very fuel-efficient car.

Important Considerations:

  • Once you choose a method, you’re generally stuck with it for the life of the vehicle. If you use the standard mileage rate, you can’t switch to actual expenses later. However, you can switch from the actual expense method to the standard mileage rate.
  • You cannot use the standard mileage rate if you’ve claimed depreciation using methods other than straight-line depreciation.
  • You cannot use the standard mileage rate if you’ve leased a vehicle.

The Impact of the Tax Cuts and Jobs Act of 2017

The Tax Cuts and Jobs Act of 2017 significantly changed the landscape for employee business expenses. For many employees, the ability to deduct unreimbursed employee expenses, including mileage, was eliminated. This change had a considerable impact on the tax returns of many individuals. If you were an employee, you could generally only deduct unreimbursed business expenses if you itemized deductions, and these deductions, along with others, had to exceed 2% of your adjusted gross income (AGI). Due to the tax law change, itemizing deductions for employee expenses is generally no longer available.

Maximizing Your Mileage Deduction: Tips and Strategies

  • Track Every Trip: Be diligent about recording every business-related trip, no matter how short.
  • Use a Mileage Tracking App: These apps can automate the process and make record-keeping easier.
  • Understand the Rules: Familiarize yourself with the IRS guidelines to ensure you’re compliant.
  • Consult with a Tax Professional: A tax advisor can help you determine the best method for your situation and ensure you’re taking all eligible deductions.
  • Keep Records Organized: Store your records securely and in an organized manner for easy access.

Common Mistakes to Avoid

  • Failing to Keep Accurate Records: This is the most common and potentially costly mistake.
  • Claiming Personal Mileage: Only business-related mileage is deductible.
  • Not Understanding the Rules: Misunderstanding the regulations can lead to disallowed deductions.
  • Mixing Up Business and Personal Expenses: Keep your business and personal vehicle expenses separate.
  • Ignoring the Impact of the Tax Cuts and Jobs Act: Be aware of the changes to employee deductions.

Where to Find More Information

  • IRS Publication 463: This IRS publication provides detailed information about travel, gift, and car expenses.
  • IRS Website: The IRS website (IRS.gov) is an excellent resource for tax forms, publications, and answers to frequently asked questions.
  • Tax Professional: Consulting with a qualified tax professional can provide personalized advice and guidance.

Frequently Asked Questions

What happens if I don’t track my mileage throughout the year?

Without accurate records, the IRS may disallow your mileage deduction. This could result in owing more taxes, plus potential penalties and interest.

Can I deduct mileage for commuting to and from my main job?

Generally, commuting miles are not deductible. However, there are exceptions, such as if you travel to temporary work locations.

Do I need to own the vehicle to claim a mileage deduction?

No, you don’t necessarily need to own the vehicle. If you lease a vehicle, you can still deduct mileage, but you cannot use the standard mileage rate.

How do I know if I’m using my vehicle for business?

Business use generally involves trips that are directly related to your work, such as meeting clients, delivering goods, or traveling between business locations.

Is it possible to amend my tax return if I forgot to claim mileage?

Yes, you can amend your tax return to include mileage deductions. However, you must do so within a certain timeframe, typically within three years of filing your original return or two years from when you paid the tax, whichever is later.

Conclusion

So, can you write off your mileage in 2018? The answer depends on your specific circumstances. For self-employed individuals and some employees who qualify, mileage deductions can provide significant tax savings. However, the key is to understand the rules, keep meticulous records, and choose the method that best suits your situation. Remember the changes brought about by the Tax Cuts and Jobs Act of 2017, especially for employees. By following the guidelines outlined in this article, you can navigate the complexities of mileage deductions and potentially reduce your tax liability.