Should you claim the mileage tax deduction or would you better benefit from taking the standard deductions?
Are you wondering if you can even deduct travel expenses related to your employment?
You may deduct certain ordinary and necessary transportation expenses; however, the miles that you drive to and from work are generally not deductible.
There are special instances in which they may be deductible.
Examples of deductible transportation
The following example is an instance when you can deduct transportation expenses based on the location of your work and your home:
Example: You regularly work in an office in the city where you live. Your employer sends you to a 1-week training session at a different office in the same city. You travel directly from your home to the training location and return each day. You can deduct the cost of your daily round-trip transportation between your home and the training location.
In order to then claim these expenses, you will need to do some organizing and planning of your deductions to see if claiming these expenses would be beneficial to your tax situation.
Assess your itemized deductions
You must assess whether you have enough itemized deductions to exceed the standard deduction for your filing status.
Itemized deductions may include:
- Medical and dental expenses (in excess of 7.5% of your Adjusted Gross Income)
- State and local income taxes
- Home mortgage interest, qualified mortgage insurance premiums, and real estate taxes
- Charitable contributions
- Unreimbursed employee expenses, tax preparation fees, and other miscellaneous deductions (in excess of 2% of your Adjusted Gross Income)
The 2012 standard deduction amounts are:
- Single and Married Filing Separate – $5,950
- Head of Household – $8,700
- Married Filing Joint and Qualifying Widow(er) – $11,900
Do your itemized deductions exceed the standard deduction?
If you determine your itemized deductions will not exceed the standard deduction, then claiming these expenses will not benefit your tax situation.
On the other hand, if you determine your itemized deductions may exceed the standard deduction, then you will want to keep track of the expenses incurred with your travels.
How much can be deducted?
Unreimbursed Employee Expenses are subject to a 2% limit that also applies to certain other miscellaneous deductions.
The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of the adjusted gross income on the return.
Needed documentation for claiming unreimbursed employee expenses
Lastly, keep in mind, that if you do assess that you may be able to deduct these expenses, there is certain documentation you must keep with your tax records to substantiate your claims (Note: This information does not need to be submitted with the return).
Adequate records for mileage should contain the date you started using the vehicle, the date of the expense, the mileage for each use, the total miles for the year, your business destination, and the purpose for the expense.