MBO Partners offers guidance on how to make the most of transportation costs for independent workers by tracking and taking a deduction:
What Qualifies as Business-Related Mileage?
As a general rule of thumb, any car expenses you want to deduct must be necessary, appropriate, and common for your industry. For independent consultants, that generally includes client visits, or driving to a business meeting.
Next, it’s important to clarify that deductible mileage depends on where your primary place of business is located. If you have a home office, all miles are deductible from the time you leave your house to the time you drive anywhere to do anything related to your business.
On the other hand, if you work out of an office separate from your home or have a store, you cannot deduct the miles you drive from your home to your place of work—this is considered a commute rather than business-related travel.
However, if you leave your place of work and drive anywhere to conduct business, whether it’s a client meeting or an office supply store run, you can deduct those miles.
Actual Expenses vs. Standard Mileage Rate
There are two ways you can deduct business-related mileage: actual expenses, or a standard mileage rate.
Actual Expenses Method
With the actual expenses method, you can deduct the actual cost of using your car for business, plus depreciation. This method requires more intensive record keeping, but may result in a larger deduction.
To use the actual expenses method, keep track of all of your car-related costs throughout the year, including: gas, oil, tires, insurance, registration fees, licenses, and depreciation. You’ll also need to track your total miles driven, separating out personal miles and business miles.
To calculate your deduction, multiply your total expenses by the percentage of business miles driven during the year.
Standard Mileage Rate Method
With the standard mileage rate method, your deduction is based off a pre-determined cents-per-mile rate for every business mile you drive. For 2017, the rate is 53.5 cents per mile.
If you choose this method, you’ll need to track your total miles driven, separating personal use from business use. With the standard mileage rate, you can’t deduct actual care expenses for your car such as maintenance fees or insurance. However, you can deduct any business-related parking fees and tolls.
To calculate your deduction, multiply your business miles by the standard mileage rate for the year.
Read the full story at Make the Most of your Transportation Tax Deduction in 2017 | MBO Partners