Taxes and Miles Driven

[Ruger22C]

If you're a sole proprietor and the IRS counts the miles you drove in one year as worth 50k in deductions, but you only actually spent 10k, does this mean that (assuming you have enough income) you can pocket the other 40k without having to pay tax on it?

 

[highland145]

So 200k miles-ish?

 

[Ruger22C]

So 200k miles-ish?

They allow 58c per mile, do they not? But the specifics don't matter; I only need to know the general answer.

 

[BoomerD]

Yes. The excess is considered as compensation for regular wear and tear, oul changes, tire wear, etc.

 

[Ruger22C]

Yes. The excess is considered as compensation for regular wear and tear, oul changes, tire wear, etc.

That's amazing! I might change my career goal.

 

[BoomerD]

Must be prepared to prove the mileage is all business related should the IRS inquire...or audit your return.

edited fat thumb damage

 

[Ruger22C]

Must be prepared to prove the mileage is all business related should the IRS inquire...ormaudit yourmreturn.

As a photographer, I believe that would be easy; almost everywhere is a wedding shoot, a portrait session, a landscape with the potential of being sold as a print, etc.

Of course I wouldn't count miles driven to Wal-Mart for regular shopping, etc.

 

[IronWing]

Too bad the medical use rate is only $0.17/mile. Business got way better lobbyists.

 

[dasherHampton]

Assuming that 200,000 is correct you drove approx 10 hours a day every day of the year at 55 mph?

That might get your return kicked out for human inspection. I'm not saying it will for sure but it might.

 

[IronWing]

200k is way off. To get a $50k deduction, he needed to drive 86,207 miles. Still a lot of driving but doable.

 

[dasherHampton]

That's better, but still almost 5 hours a day on the road every day of the year. I guess the IRS probably wouldn't consider it worth their time.

The most I ever claimed was around 32,000 and I felt like I was on the road constantly. It sucked.

 

[Ruger22C]

That's better, but still almost 5 hours a day on the road every day of the year. I guess the IRS probably wouldn't consider it worth their time.

The most I ever claimed was around 32,000 and I felt like I was on the road constantly. It sucked.

Why drive at only 55 when you're getting paid 58c/mile?

By the way, I only used the example as a reference point; I haven't even yet driven any business miles this year.

 

[BarkingGhostar]

Assuming that 200,000 is correct you drove approx 10 hours a day every day of the year at 55 mph?

That might get your return kicked out for human inspection. I'm not saying it will for sure but it might.

That's neighbor local road speeds where I'm at. Main roads (high street) it is usually 65, and on the Interstate it is 70-90 MPH.

 

[Lost_in_the_HTTP]

Why drive at only 55 when you're getting paid 58c/mile?

Traffic fines, lawyer fees, suspended/revoked OL, insurance rates .....

You sound like an audit looking for a place to spend a few weeks. Remember, Uncle Sam is giving out free mega bucks to the homebound. He'll be looking for a way to recoup some of that. Expect more audits and aggressive collections.

 

[skull]

If you're a sole proprietor and the IRS counts the miles you drove in one year as worth 50k in deductions, but you only actually spent 10k, does this mean that (assuming you have enough income) you can pocket the other 40k without having to pay tax on it?

Why drive at only 55 when you're getting paid 58c/mile?

By the way, I only used the example as a reference point; I haven't even yet driven any business miles this year.

You do realize how taxes work right? Your not being compensated by the mile and wouldn't pocket 40k.

 

[skull]

Too bad the medical use rate is only $0.17/mile. Business got way better lobbyists.

That is BS I thought it sucked I only get 58 cents a mile for a box truck when cars get the same. The depreciation is done on my truck this year and mileage is beating actual costs by a $1000. If I remember right I have to keep using actual if I want to use it again though. My maintenance costs could be a lot higher next year so don't want to get stuck doing mileage.

 

[Greenman]

That is BS I thought it sucked I only get 58 cents a mile for a box truck when cars get the same. The depreciation is done on my truck this year and mileage is beating actual costs by a $1000. If I remember right I have to keep using actual if I want to use it again though. My maintenance costs could be a lot higher next year so don't want to get stuck doing mileage.

I always use mileage and drive the vehicle for 10 to 12 years. I average 25k a year, it works out.

 

[Ruger22C]

Traffic fines, lawyer fees, suspended/revoked OL, insurance rates .....

Legal limit on the interstate that's just miles away from me is 75. I wonder where you are that has 55 as its max.

 

[IronWing]

Legal limit on the interstate that's just miles away from me is 75. I wonder where you are that has 55 as its max.

1985

 

[BoomerD]

1985

Most metro areas (at least here along the left coast) have 55 mph or lower speed limits through the heavy traffic areas. For me, about 25 miles away is a freeway (state highway, not interstate) that eventually has a 60mph limit...and about 75 miles away is I-5 which, a few miles south of Olympia, has a 70 mph limit.
Around here, state and US highways are mostly just small 2 lane roads with 55 mph topspeeds.

 

[s0me0nesmind1]

Yes. The excess is considered as compensation for regular wear and tear, oul changes, tire wear, etc.

Aside from "wear and tear" - I believe it's also supposed to account for gasoline refills as well.

Also just in general, unless it's something that is a refundable credit - you will never get money back or get to "pocket" the amounts. It's simply deductions you can expense to offset income that has tax due.

 

[IronWing]

Most metro areas (at least here along the left coast) have 55 mph or lower speed limits through the heavy traffic areas. For me, about 25 miles away is a freeway (state highway, not interstate) that eventually has a 60mph limit...and about 75 miles away is I-5 which, a few miles south of Olympia, has a 70 mph limit.
Around here, state and US highways are mostly just small 2 lane roads with 55 mph topspeeds.

Come back the great wide open! NV = 80, Utah = 80 (but you get caught speeding, it hurts), AZ and NM = 75 (w/ AZ basically not enforcing until 85), TX = 85, etc.

 

[Ruger22C]

Also just in general, unless it's something that is a refundable credit - you will never get money back or get to "pocket" the amounts. It's simply deductions you can expense to offset income that has tax due.

If I can't "pocket" it, then what happens with the remaining 40k that I mentioned in the OP?

 

[BoomerD]

If I can't "pocket" it, then what happens with the remaining 40k that I mentioned in the OP?

OK, look...you don't get it handed to you...you get to deduct it from your gross income.

Small businesses can benefit from deducting vehicle costs on their taxes | Internal Revenue Service

Tax Tip 2019-57, May 10, 2019

www.irs.gov

If you drive enough miles go be able to deduct $50,000 from your gross income, they you'll also benefit by paying less in taxes on that income...

Keep in mind that as a small businessman, (IIRC) you'll need to itemize your deductions instead of taking the standard deductions to be able to take your mileage. If you don't have enough to offset the standard deduction with, as an example, mortgage interest and taxes, etc, then by itemizing for the mileage, you'll gain the deduction for mileage...but lose the standard deduction amount...which is fairly significant.

 

[Ruger22C]

OK, look...you don't get it handed to you...you get to deduct it from your gross income.

Small businesses can benefit from deducting vehicle costs on their taxes | Internal Revenue Service

Tax Tip 2019-57, May 10, 2019

www.irs.gov

If you drive enough miles go be able to deduct $50,000 from your gross income, they you'll also benefit by paying less in taxes on that income...

Keep in mind that as a small businessman, (IIRC) you'll need to itemize your deductions instead of taking the standard deductions to be able to take your mileage. If you don't have enough to offset the standard deduction with, as an example, mortgage interest and taxes, etc, then by itemizing for the mileage, you'll gain the deduction for mileage...but lose the standard deduction amount...which is fairly significant.

That's why there's confusion. Posters have assumed that I thought the gov't was giving me money, even though I clearly laid out in my OP that I was only asking about that 40k which I would have earned as income.

No, I do not think the gov't is giving me money. I wanted to know whether I'd have to pay taxes on that 40k, considering that it would have been deducted via miles driven. And whether I could keep that 40k, or had to put it back into that business (perhaps in the same year), etc.

Will you say more about itemizing, etc. in order to take mileage?