From One Work Place To Another: It's business mileage.

  
The questions below about deducting auto expense were sent to me by our fellow indies. Here's a really simple answer to all of them: You may deduct the cost of going from one work location to another. A work location is any place you must be for your work.

Check out my bracketed [notes] to see if you can figure out the answer.


I have retired and moved to central Illinois. However, my previous employer in Chicago wants to hire me as part time (2 days a week) consultant. Is my mileage from my home [not a work location] in central Illinois to the office building in Chicago [is a work location] a tax deductible business mileage expense?

Kenneth
Chillicothe, IL

Answer: No


Hi June,

My name is Rick from Keytesville, MO. I've gotten several answers to my questions today just by reading your blogs.

Being in the clergy I have a difficult time finding someone who really knows about my tax situation. I work for an association of 26 churches. We have an associational office 40 miles away in a larger town and in that office I have an office. [is a work location] I also have an office in my home [is a work location] which I work from so I don't have to drive the 40 miles to town. I work both places about the same amount of time. I also have to drive to my churches [are a work locations] and various other locations for work [obvious work locations]. I understand that when I drive from my home office to my associational office that it considered a commute.[Not a commute unless you are going there solely to get that day's work assignment.] but if I drive from my home office straight to a different work location can I still get reimbursed for that mileage even if the work location is within 5 miles of the associational office. At the end of the day do I get to count my mileage back to my home office [is a work location] as reimbursable. Sometimes I go back to work other times just to go home [is not a work location].

Rick

Answer: All driving as described is deductible business mileage expense except the drive home.


Hi June!

I found your site just in time to file my 2008 taxes and have been bragging ever since. My friends continue to love your straightforward advice too!

OK, so I move. A lot. and always have my main office in the home. [is a work location] My current home (and for the last part of 2010 tax year) is a rented room and a separate rented studio/office/shed in the backyard. I rent both from a couple. I pay a set rate for the bedroom, we split utilities for the house that we share, and they just added $200/month for the shed space (which is only used for work). This is currently spelled out in the lease.

I travel frequently for work, and once or twice a week drive to an office for one of my main clients [is a work location]. My question: How should I claim my studio? I would like to be able to deduct miles driven from my office [is a work location] to stores [are work locations if you are buying items for your business], to meet with clients [is a work location] , or to airport to travel for work [is a work location].

Of course, I don't drive from my house to the office (I just walk a few steps).

Amanda
Asheville, NC
artist - arts administrator
4 years as an indie

Answer: All driving as described is deductible business mileage expense.

No Mileage Rcords

  
Dear June,

First I would like to say thank you for sharing your tax expertise with so many. We need the help! Especially me. This is my first year working my own business and I'm quite lost with tallying up all the business expenses and which ones I can tally up being appropriate.

One of my main questions I need help with is mileage. Earlier in the year I worked as an independent contractor for a photography company which required me to put a ton of miles on my car driving to and from different customers homes to show them the photos. My husband told me I should have kept a book logging each and every mile from every day, including my mileage for my new business (permanent makeup).

Needless to say, I didn't realize I was supposed to keep such a log, however, would like to write off the miles. Could you please advise me and tell me if there are any other options?

Thanks so much for your help! It is very much appreciated.
Kristina


Kristina, your husband is correct but why didn't he tell you sooner?!

You will need to reconstruct your time as an independent. Pull out your calendar, receipts, phone records, anything that can help recall where you went and when. Keep in mind errands that you did. A post office receipt means a trip to the post office. Same with an office supply store receipt. Then go to mapquest or the like and start charting mileage.

Every 20 business miles may say you about $3 to $4 in taxes. So you decide how much your time is worth and whether the reconstructing will be of value.

-- June

Keep It Simple: Round Off

Hi June,

I have been working as an IT Contractor from home for three years.

Occasionally, I have local travel expenses relating to my business (driving to the bank, post office, or home office store). I have been keeping good records and track of mileage. However, I am confused as to the rounding of mileage. If a trip is 2.5 miles, for example, should I record that as 2.5 miles or 3 miles?

Thanks, Billy
Arlington, VA


Hi Billy,

I always round off numbers, whether mileage or money. Five or more brings it up to the next whole number. Less than five does not. And I never do pennies.

So:
2.5 = 3
2.4 = 2
$1.85 = $2
$49.49 = $49

-- June

Checking; contributions; dining; home storage

Because Ron sent several questions look for my answers after each question.


Hi June,

I initially found you because I was looking for information on business checking online. The fees, beginning at $12 monthly (for the least expensive option) seem unnecessary, and as I have been keeping solid records since beginning my consultancy last year, think I’m going to stick with the personal account for now. Nice to see someone provide a good rationale for what seems a rational choice.
Ron refers to these posts on business checking accounts.

So now I’m writing because I’ve just finished reading your book Self-employed Tax Solutions (terrific – thank you! everyone should follow your New Year’s Eve/Day tip!). I agree. I’ve been tracking all my expenses and incomes meticulously, but you gave me some other good points to think about. Here are some questions I have, based on the book scenarios:

1) My kids’ sports leagues all solicit team sponsorships from local businesses. But in your book, you suggest this might not be a wise write-off for indies. Can you elaborate? Should I not do it? And what about sponsoring the softball team that I play on myself?
A quick overview on charitable contributions made by sole proprietorships -- indies: They are not deductible as business deductions. They are personal deductions. Advertising is deductible. So $100 to your daughter's soccer team -- not deductible. $100 for an advertisement in your son's concert program -- deductible. $500 for hockey uniforms that have the name of your business visible to the public -- deductible.

2) I’m still hung up on the “if you have dinner with your wife …” point, primarily because you’re describing exactly what happens to us: The only real time we get to talk about the business, strategy and planning is when we dine together! Permissible deduction, right?
Dinner with someone with whom you have a personal relationship is deductible only if the reason for the dinner is business. Not that you happen to talk business while at dinner. There must be specific business goals that you work on achieving at dinner: spouse reviews brochure; spouse sketches designs for an ad. Things like that.

3) Currently, I can’t take the home office deduction because we don’t have “exclusive space” to work from. But, we do have some space that is exclusively used for storage of business books, files and materials. Can I claim that area? Yes.

Thank you – RA in L.A.
Ron
Long Beach, Calif.

Good Records = More Deductions

Hi June,

I'm a jewelry artist -- three years.

I've decided to take the plunge and start applying to do outdoor art festivals. I have to buy a camper shell for my truck to haul all the required paraphernalia (protect from weather and thieves!). Since the truck is also for personal use, I can't figure out if there's any way to deduct/depreciate part of the cost of the topper? It's not feasible to take it off when not being used for shows. Is there anything I can do? These things aren't cheap!

thanks,
zee
Tallahassee, FL

p.s. my New Year resolution is to reread your book and keep better records!!!



Hi zee,

I'm going to start with your PS. The better your records the more you can deduct. I should put a"generally" into that statement, however, I have found it to always be the case.

If you keep good records then you look more like a business to the IRS and the IRS is more likely to accept an untypical deduction.

So, with not so good records, I would deduct the cost of the shell based on the portion of business use of the truck. The IRS could not argue with that.

With really good records -- which would include photos of the truck in the rain at shows -- I would use the entire cost as a business deduction. And even with that, I am not sure the IRS would accept it.

Of course, if you removed the shell when using the truck for personal use you cold deduct the entire cost.

You might want to take a look at my new petite publication The Confident Indie: Five Easy Steps -- easy recordkeeping as well as my worksheets for your 2010 tax return.

I wish you success at the festivals!
June

Keeping a Record of Subway & Bus Costs

Dear June,

My daughter is a free-lance visual artist in New York City, who spends about $100 a month for a subway pass that entitles her to unlimited trips. The primary use of the pass is to get to work, but it is also used for personal transportation. Is there any way she can deduct part of the expense?

Thanks,
Martha


Dear Mom,

Your daughter needs to keep a transportation record for a typical month. Then, for instance, if 62% of her trips were for business she may deduct $62 of every subway pass she purchases. If there is no typical month or it changes then she needs to keep records for, let's say, seasonal months and extrapolate from there, perhaps 6 months at one % and the other 6 months at a different %.

Keep in mind that commuting from home to work is not a business deduction. Going from one work place to another is. So only if she has a legitimate home office is her trip from home to a client deductible.

I assume that since you are writing for your daughter she is young and new to the business / working world. Time for her to learn about taxes. No 21st century woman is allowed tax-ignorance. You might want to suggest that she take a look at my blog and my book, Self-employed Tax Solutions.

Here's a post I know she will find helpful, Designers Dozen: Tax Saving Tips for the Graphic Artist.

-- Another Mom with 4 kids

Auto Arithmetic

Hello June,

I found you through a Google Search. If you don't mind, I've got a question I'm sure you could answer.

So, I am starting a home based business as a sole proprietor, and I am using my personal vehicle for business as well.

If I am to take my car out to two locations on the same trip, one being for personal purposes and the other for business purposes, how do I determine the number of miles to attribute to each?

For example, let's say I'm starting from home and drive 10 miles to the mall to shop for personal, then drive an extra 5 miles to the bank for business, and then 15 miles home. How do I split up the miles? [June's calling this SCENARIO 1.]

Another scenario would be if I, again, start from home and drive 10 miles to the bank for business, and then an extra 5 miles to the mall to shop for personal purposes, and then 15 miles home. How do I split up these miles? [June's calling this SCENARIO 2.]

Thank you June, in advance.

Sincerely,

Sarah


Hello Sarah,

From your total miles for the trip you subtract what would be your personal miles were you to have done only personal errands. What's left are business miles. Think of it as a grade-school arithmetic problem. It's not more complicated than that.

SCENARIO 1:
30 miles = total trip
20 miles = personal miles to the mall and back, as if mall were the only errand
10 miles = business

SCENARIO 2:
30 miles = total trip
20 miles = business, as if if business were the only errand
10 miles = personal, additional miles going to the mall

-- June

From One Wedding To Another: Deductible mileage

Hi June,

I've found your book, Self-employed Tax Solutions, very helpful in preparing my tax return this year. I have a question I can't seem to figure out from reading your section on Auto Expenses.

I've been an indie wedding photographer for almost 10 years. I've never kept a record of my travel to and from weddings until last year, I put all my weddings and appointments with clients in my computer's calendar. Although I did not write down my mileage at the beginning of the year or the end, since it is easy to use Google maps to tally up the mileage to and from weddings, can I just add them up, multiply by the mileage rate, and deduct them?

Also, since I work at home, is it considered traveling to another work site to do the wedding, and therefore only the first half is deductible, not the coming home?

Thank you so much,
Sharon
Oakland, CA


Hello Sharon,

To tally work mileage, you may use any method that works for you. A calendar and Google maps is perfect. And also remember all your errands, too.

All mileage going to and from any work location is business transportation. That includes going to and from your home office to a wedding for a shoot; from one wedding to another; from home office to the photo supply store and back.

Best,
June

Using Your Bike for Business

Hi June,

Quick question about deductions - if you are self-employed, in my case a freelance technology consultant, and you use a bicycle every day to do things for work (going to clients' offices, picking up supplies, etc.), can you deduct the cost of the bicycle as well as the maintenance?

I read that next year there will be a deduction ($20/month) for employers whose employees use bicycles for work, but in the IRS publication (http://www.irs.gov/pub/irs-pdf/p15b.pdf) specifically says (p. 19) "a self-employed individual is not an employee for qualified transportation benefits."

This doesn't seem fair! I've asked 2 other accountants and got 2 different answers, so i turn to you, the acknowledged master of all self-employed tax
issues... :-)

thanks,
eric


Hi Eric,

Hmmmm ...."quick question" usually requires a three page answer. And "fair." You want the tax code to be fair! Well, you're not an employee. In many cases there are different regs for employees and indies. This is one of those cases. Unless there's new regs next year.

Here's what I would do: Treat bicycle expense similar to car expense. Figure out how much you use your bike for business transportation versus your total use and deduct that % of the total cost of your bike. A $300 bike used 90% for business would get you a $270 business equipment deduction. Repairs, new tires would be handled the same way.

Hope that helps.

Best,
June

Son Has A Landscaping Business

Happy New Year, Indies!

It is not my policy to answer questions that are unique to one person's situation . I have made an exception here because I think this is a cool Q&A to start off the new year. My answers are in orange.

-- June


Ms. Walker,

Your book has been very helpful to us -- equally understandable by a teen and his OLD, almost 50-yr old dad. Ohmygosh, you think 50 is old!

Our 16-yr old son has mowed lawns for neighbors since he was 10 using the unregistered name "Clean-Cut Landscaping Services" the last four years. To get him started, we trash-picked a lawn mower and had it rebuilt for him. He repaid us and has since purchased all his equipment with cash, grossing $30K last year. Impressive.

He now uses a 8'x12' shed and half our 22'x24' two-story barn garage for his ~20K worth of mowing, leaf collection, snow blowing, mulching, planting, hedge, and tree equipment. His younger brother is now working with him, pulling the 8' bike trailer with equipment that the older one had pulled with his bike before he purchased his commercial riding mowers. A family business is good.

He is home schooled and consistently scores extremely well on standardized tests. His routine is starting his school work at 0530 and finishes at ~1300, with some variation for outside coop classes. With No-Child-Left-Behind as policy in public school the past few years, it's no surprise that home-schooling has been on the rise.

Our questions follow:

1. Can we charge him rent on the shed and garage storage space for his business equipment and he deduct that as a business expense? That would help to compensate us for what is now used solely by him. Yes, if you claim the rent as income.

2. Presumably he could not use such a deduction until he is actually paying us? Correct. That is, we cannot prorate the tax, repair, utility, etc. proportion of business-use of our total living space (house, garage, and shed) described in your book until it is a valid expense to him? You are asking about a home office deduction. You can not take a home office deduction because it is not your business.

3. Can we charge him for the sizable laundry cost required for his business and he deduct that? He currently buys his work clothes and shoes. Think of it this way: Were he to pay a laundry service to clean his clothes he would deduct the expense; the laundry service would claim the amount paid as income. You would need to claim the fee for laundry service as income. Depending on your income and tax bracket it may or may not be a tax advantage to have him pay you.

4. Can he claim as transportation expense the mileage from his garage and shed storage area to those neighbors where he conducts his work? He uses his large, 5' deck riding mower to transport all his equipment. His 50-customer clientele is primarily within a 1-mile radius, but for some jobs he has to make multiple trips to transport all the equipment required for that job. Yes.

5. To avoid withholding social security taxes, to his younger brother, will his brother also need to meet the criteria for a sole proprietorship? I assume that would be the simplest arrangement for the two. It's not a question of simple. His younger brother is his employee.

6. Finally, you mention in your book the option of fully deducting the cost of purchased equipment the year in which it was purchased. Are there any particular requirements that he must meet to do that? That's a tax preparation how-to question regarding depreciation. I do not give tax preparation instruction.

Thank you.
v/r Jonathan (dad) for Abraham (older son) and Moses (younger son)
Glenside, PA
You are welcome. Sounds like you have great kids. Kudos to the parents.
June Walker

Transportation expense from job to home office

Thank you, June, for the great information. I've downloaded your business expense list, spent lots of time reading your blog, ordered your book from Amazon, and I still have a question that I probably should know the answer to, but I don't so here go:

I'm an employee and an indie. I know that if I work a couple of hours in the morning (at my home office) before I go to my regular job I can claim that expense (going from workplace to workplace).

What about in the afternoon? When I go from my regular workplace to my home office to do more work? Can I claim that expense?

Thanks, Gary


You are welcome, Gary.

A while ago I spoke with the IRS on just this situation. While that IRS researcher agreed with me that the going and coming from one workplace to another was business transportation and therefore the cost would be a business deduction she could not give me an opinion on whether it should be an expense against the indie business income or against the employee's job.

If I were making the decision I would look at the entire return including how much income from the indie venture versus how much from the job. Depending on the transportation expense, perhaps I'd split the expense proportionate to income.

Best,
June

Check out my book Self-employed Tax Solutions. It will simplify your tax and financial life, and save you money!

More about Business Auto Expense

Maybe it’s because gas prices are rising that I received a lot of questions about auto expense. I hope my responses here and elsewhere on my blog to the many questions about auto expense will help all you indies who use your car for business.

June,
I am considering taking a sales position. It would be outside sales. I would use my own car. They said that I could use my car as a write off. How do I look at this? If I put on 10,000 miles a year how much is it costing me to operate my vehicle and what do I get to deduct off my taxes if I make 40,000 a year?
Dave from Champlin, Mn


Hello June,
My name is Cesar, I am from Fairfield Ca. and been self-employed for the last 5 years as full time structure draftsman who works for a structural engineering firm.

My question is I have my client who's office is in San Francisco downtown and I travel to that office sometimes 5 days a week, but try to work from home at least 2 days when no rushes or deadlines occur, also work during the weekend as well.

Can I write off lunches I buy for myself?

Can I write off mileages and gas receipts? or one or the other on gas and miles? Also can I write off car insurance on one of my cars?


Dear June:
Your book Self-employed Tax Solutions has been an invaluable help.

Regarding auto mileage deductions, I make a bank deposit daily. I want to know if I can take a mile deduction for driving to the bank from my house on the way to work or if I should go to the bank on my way from work. I can do either I was just trying to do what ever would give me the biggest benefit.For 2008 I will have an in home office deduction thanks to reading your book. The room I lease at the Spa is too small for an office so I do all my calls, Bank deposit slips and paperwork at home.

Thanks for the Help Joyce San Antonio, TX


Kimberly from Columbus, OH
I’m having a problem trying to calculate my miles driven per day for the year to get more tax money can you please help me out?


You may deduct as a business expense the cost of going from one work location to another. It’s as simple as that.

If you don’t have a home office, then you may not deduct going from home to the bank or to your studio in town or to your client’s office. You may deduct the cost of going from the bank to your studio or to your client’s office.

Business auto expense can be figured in one of two ways.

The first, the standard mileage method, simply multiplies your total business miles by a per mile rate set by the government. The rate changes yearly . For 2007 the rate was 48.5 cents per mile. For 2008 the rate is 50.5 cents per mile.

The other, the actual expenses method, multiplies your total auto expenses by the percent of business use. If you put 20,000 miles on your car in 2007 and 5000 were for business use then your business portion is 25%.

Expenses for your car, include items such as:
· Gas & Oil
· Repairs & Maintenance
· Tires
· Insurance (Remember AAA or other road service coverage, too.)
· Registration & License
· Car wash
· Garage rental
· Loan interest
· Lease costs
Parking tickets, speeding tickets and fines are not deductible business expenses.

Added to the business portion of expenses is the amount for depreciation of the business portion of the cost of the auto.


A note to Cesar: Sorry, no lunch deductions. Take a look at my response On-the-road Meal Deductions to Kevin earlier today. You may deduct meals only when traveling. Check out the expenses -- meals and entertainment (8) category for a fuller explanation.

Check out my book Self-employed Tax Solutions. It will simplify your tax and financial life, and save you money!

Reimbursed Auto Expenses

June --

I have been an attorney for 7 months.

I know there are two ways to deduct car expenses. But if I am reimbursed by a client for some of my mileage, am I stuck with the mileage method? E.g. I travel regularly from my home office to my office down town. I am paid by the client at 50 cents a mile for trips to court and meetings at their sites.

Elizabeth from Rapid City, SD


Elizabeth,

The reimbursement is part of your income. You may want to read these posts on expenses -- reimbursed .

Combine those miles with all your other business miles and use same deduction method for all business miles.

-- June

Check out my book Self-employed Tax Solutions. It will simplify your tax and financial life, and save you money!

Auto Algebra & the 2008 Mileage Rates

June,

Awesome site and info! I am definitely looking forward to purchasing the book, Self-employed Tax Solutions.

I am in negotiations with my first client to become their marketing consultant. I will be leading all of the marketing, PR, communication and fundraising activities for a non-profit organization.

I will be leasing a new vehicle soon after the new year. The client has proposed to pay mileage reimbursement for any duties related to their business. I will be driving both the new leased car and my current, much older, high mileage vehicle. Would the tax benefits of driving both cars normally outweigh a monthly mileage reimbursement check from a client? We're probably talking over 200 miles per month for this particular client because I don't they will include mileage from my home office to this office.

If not, can I still hold off auto expenses for other clients and still receive reimbursement from this particular client?

I'm anxious for your reply. This is probably the final negotiating term before I get started.

Thanks a million!

Jason from Charlotte, NC


Congratulations on your new indie work, Jason. And thank you for your generous comment about my site.

I will try to simplify your situation and thereby make it applicable to a lot of indies. First I am going to assume you have read, or I suggest you read if you haven't, How to Calculate Auto Expense and How to Keep a Record of Business Miles on my website. Then you should know that the mileage rate allowed by the IRS for 2008 is 50.5 cents per mile.

As an indie, all the payment you receive ,whether fees or reimbursement for expenses, is part of your gross income. All expenses, whether they were reimbursed or not, are deductible expenses.

For example, if XYZ pays you a fee of $5,000 + reimbursement for 200 miles at 50.5 cents per mile [that's $101] your gross income = $5,101.

Were you to use the standard mileage deduction for your car you would deduct the $101 as a business expense to get to an income of $5,000.

Were you to use actual expenses, it would depend on the costs of running your specific automobiles. Could be more than 50.5 cents per mile. Could be less. So your income could be more or less than $5,000.

To say which is better, reimbursement or not you need to compare two things. Your actual cost of running your car and how much your fee would increase were you to accept a higher fee and no reimbursement.

You may have several clients and some may reimburse you, some may not. You may still deduct all auto miles, for all clients, using either method, as long as you claim the reimbursement in your income.

There are several posts on this blog about reimbursed expenses that you might want to check out.

There is a full explanation of transportation and auto expenses in my book, Self-employed Tax Solutions.

Best,
June

10 Tax-saving Tips for Writers

Attention writers.

All you freelancers, whether your income skyrockets in the 100s of thousands of dollars or you’re closer to $500 per year, Uncle Sam treats you all the same.

That’s right, amount of income earned by a writer carries no weight with the IRS. You all must follow the same rules. The most horrendous audit I've ever handled was that of an established poet who earned less than $5,000 that year.

I've put together 10 time-and-tax-saving tips on how to simplify complex IRS rules to fit your writing style. All stem from questions you have asked me or areas where I know you need help. A while back I presented a similar set of tips to designers -- Designers Dozen: Tax Saving Tips for the Graphic Artist .

1. Use two offices. Forget the old husband’s tale that home office or studio is an audit red flag. The IRS has lightened up on this. Even if you work out of two or three places, if used exclusively for your work they are all legitimate deductions. Yes, both your home office and the spare room at your country place where you do your three-hour morning blogging routine every weekend are deductible business expenses.

2. Work at home to increase your business transportation deduction. If you do most of your research and writing at a local Internet café or college library or rented office you may still deduct costs for the area of your home used exclusively and regularly for your business, no matter how small the area. And by having two work places you’ll increase your deduction for auto use or public transportation costs.

Here’s why: The IRS does not allow a deduction for commuting from home to work and back. But it does allow a deduction for getting from one workplace to another. If you work in your home office and then drive to your other workplace – the library -- you are now driving “from one workplace to another.” You've increased your business miles and the amount of your auto deduction, or made your subway trip a business expense.

3. Careful, no office sharing allowed. Keep in mind the all-important IRS exclusive use rule: that your office must be yours and yours only. If you’re the writer for Clyde Client and your spouse handles the graphic design side of Clyde’s website and both you and your spouse use the same office – sorry, no home office deduction.

The way around that: make one spouse the employee of the other. By the way – there are a whole lot more benefits to hiring your spouse.

4. Hire your spouse. Even if your honey only helps you out with printer jams or errand running or fact checking, pay him for it. Putting him on your payroll opens up a vast array of deductions. You can provide generous employee benefits and deduct the costs of those benefits from your writing income. What kind of benefits? Well, for one thing, you can give him a medical plan that covers his family – that’s you and the kids. That would make your doctor bill a deductible business expense.

5. The more broadly defined your business the more deductions you can take. Being a sports writer limits your deductions. Same with calling yourself a technical writer. Yet we know if the money were there you’d write about pretty much anything.

Maybe you can position yourself as a generalist writer; in any case, describe your field of writing as broadly as you comfortably can. Do you sell ads on your blog? Do you sell a copywriting course on your website? Do you write for blogs and edit press releases for local businesses, all while working on your book? Perhaps your true business profession is a writing and marketing consultant rather than a writer.

Whatever your profession, claim all the income --- every dime. Consider as a possible business expense everything you do that makes you better at making money.

6. Why do you watch TV, rent DVDs, see a movie? If it’s just for fun, no tax deduction. However, if seeing films is vital to your own screenwriting or your novel in progress then claim a portion of the costs as a tax deduction. Or, has the literary void on network TV forced you to get cable? Well then, part of your monthly cable cost is a business deduction. And remember, the business use portion of the cost of your TV and DVD player is also a business expense.

7. Are you allowed to deduct a gift basket of fruit to Grandma? Of course you are -- if Gram has some connection to your business. Did she show you how to hook up your scanner? Make curtains for your office?

You’re an indie business and even though you may have a personal relationship with someone, that does not rule out also having a business relationship. This is particularly pertinent in gift-giving. Of course, if you bought your client a basket of fruit as a birthday present you would treat it as a business gift deduction. But what about the friends with whom you have a business connection? If dinner at a friend’s house was planned so that she could help you with your query letter or book proposal, then the chocolate you arrived with is a business gift.

8. Deduct your laundry and dry-cleaning. Spill ink or red wine on your white silk blouse while attending an awards event? Dry cleaning and laundry while on a business trip are deductible expenses. You may also deduct the costs of the first dry cleaning bill after you return home. But don’t get too creative and save all your winter’s dirty clothes for cleaning the day after you return from a 3-day writers’ workshop.

9. Just starting out? Twenty-five query letters out and still no magazine said yes. That’s a bummer, but even if you haven’t yet made your first dollar as a writer you may still deduct your expenses. As long as your goal is to make money, you’re in business – whether you actually make any money or not.

10. Discuss these ideas with your tax pro before incorporating them into your business. That’s the most important tip of all. If your tax pro isn't aware of them … time to get a new pro!

Using your own car for work

Hello June,

Thanks for the great and informative sites.

My question--I work as an investigator for a company that investigates accidents involving City government "department" vehicles.

The job requires the use of my own vehicle to travel to accident scenes, and I am required to drive to work so that my vehicle is available for me to respond to the scenes of accidents. I also respond to emergencies after hours as required. I am required to type up notes and report, which I can do from home.

I read that the IRS does not allow the deduction of expenses/mileage for traveling to an office, unless I am traveling from home office to office office. So the crux of the question is: Can I deduct traveling to the office, since I am required to bring my vehicle? Is my home considered an office because I am often times required to respond from home to accident sites, or if I can write a few sentences before work everyday will that suffice?

Thanks for the help.
Michael from Los Angeles, CA


Hello Michael,

So glad my sites are providing useful information. Thanks for letting me know.

On deducting transportation: The IRS says you may deduct the transportation costs of going from one work location to another, not from one office to another. So you may deduct the costs of getting from one accident scene to another, or from the office at work to accident sites.

You may not deduct your commute from home to the office and back home even though your are required to use you car once at work. The reasoning. You would need to drive to work anyway.

You talk of your "job" so I assume you are an employee rather than an indie. In which case I would use the following example from the IRS Publication 463 to allow for the costs of going from your home to an accident site after hours.

You regularly work in an office in the city where you live. Your employer sends you to a one-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.

There are several posts on this blog and my website explaining what and when working at home means legitimate home office. Take a look at them here. Writing "a few sentences before work everyday will" not suffice.

Best,
June

Auto: Lease vs Buy

Hi,

I am a freelance motion graphics artist. I have been thinking about getting myself into a new or slightly used new car. A colleague of mine mentioned the other day that I may be able to lease a new car and write off most, if not all of the cost. Is this at least partially true? Was she pulling my leg? Are there any benefits to leasing a new vehicle rather than buying being self-employed?

Joe from Los Angeles, CA


Hello Joe,

If your business requires you to wow clients with glitter, a new car every two years is imperative, and leasing is probably the better way for you. If you plan to keep the car until people start laughing at your antique then buying is better. Leasing versus owning, however, is generally based on how good a deal you can get, with tax considerations secondary. Any savings in tax deductions must of course be balanced against purchase price, operating expenses and other considerations.

Whether you buy or lease you may deduct only the potion of the car that is used for business. So if you put 10,000 miles on your car and 4,000 of those are for business then you have a 40% auto deduction. If you use the actual method of deducting auto expense you'd get to deduct 40% of the cost (over time) or 40% of your monthly lease expenses. You might want to read Deductibility of a New Truck or Car .

There are advantages to buying rather than leasing if the car is expensive, you use it more than 50% for business and you plan to keep it at least 5 years.


The factors in a lease vs buy decision are:
** How long you plan to keep the car.
** How good a deal you can get.
** What portion of your driving is for business.

Cheers!
June

Driving to see clients

June --

My wife started working as a contract employee doing work for Area Agency on Aging. She works directly with clients to set up services for them requiring her to drive out of town weekly. Can we deduct the business portion of the purchase of an automobile for her to drive to see her clients.

Gary in Nebraska


Dear Gary,

Apologies for this late response. Your email was lost in the virtual forest. For an answer, read tip # 2 in Designers Dozen: Tax Saving Tips for the Graphic Artist and also Auto Expense: From one work location to another .

They tell you what is business transportation and which isn't.

Then read Two Ways to Calculate Auto Expense on my website which will explain whether you can deduct the cost of your car.

Best regards,
June Walker

To learn more about indie taxes and Self-employed Tax Solutions please visit http://www.junewalkeronline.com

Auto Expense For A New Indie

June,

First, I just want to say that I am loving reading your Self-Employed Tax Solutions book! It is very informative.

Regarding auto deductions: For the first 5 months of this first year of being an Indie business woman I have not kept gas receipts. I've thrown them away after the credit card statements balanced because someone told me I will just be using the standard mileage method as my deduction. I also do not have a car payment.

If I purchase a new auto in the next few months would I be able to switch to the actual auto method for the rest of the year or am I stuck this year because I had not kept gas receipts.

Thank you, Maureen


Hello Maureen,

I'm pleased my book has been informative for you. Thanks for letting me know.

Here's some more info on auto expense:

** It is OK to estimate gas expense if you do not have all the receipts.
For instance, if you know that you get 30 miles per gallon, and your average cost for gas for the year was $3.00 per gallon, then you may divide your total miles by 30 and multiply that number by $3.00 to come up with your cost for gas.
Here's an example:
30,000 total miles per yr / 30 miles per gal = 1,000 gal Xs $3 per gallon = $3,000 for gas.]

** You do not have to be making payments on your car to have substantial auto deductions. If you bought your car for $25,000 several years ago, and on your first day of business use you could have sold your car for $5,000 you have a $5,000 vehicle that you are using for business. And depreciation for the business use of that car may be deducted on your tax return. And, as I'm sure you saw in the auto worksheet in my book you may also deduct repairs insurance, registration, etc.

** You may use one method to calculate auto expense for one car and another method for the other car, as long as both cars weren't used in the same business during the same time.

If anyone needs an explanation of auto expenses, just go to my website : How to Calculate Auto Expense and How to Keep a Record of Business Miles .

Best,
June

More car questions ...

June,

My company gave me a car last year for making my sales numbers over an 18 month period. The value of the car has been reported to me on a 1099 - can I deduct any portion of this?

Michellel

Congratulations, Michelle.

Yes, you may deduct all business auto expenses for that car and any other car you use for business. Read these on my website to learn more about auto deductions: How to Calculate Auto Expense and How to Keep a Record of Business Miles .

Best,
June