John Wooden always said: “It’s the little details that are vital. Little things make big things happen.” John Wooden was always about the fundamentals. Our financial lives are obviously similar. Making sure we are maximizing our deductions is a part of this discussion. For this week’s post we are going to provide some food for thought on maximizing the deductions available to us through driving our cars. These days, we drive everywhere. Some of those miles may provide us with a little bit more tax relief that some previously realized.
According to the Federal Highway Administration, the average driver spends almost 13,500 miles on the road each year. Of course, this is an average, so some accumulate more miles, and others a bit less. This includes all drivers age 16 to the oldest driver on record (according to Guinness World Records, Fred Hale Sr, - who’s license was renewed when he was 104 and then expired when he turned 108). To be short, we humans love our cars!
This driving may result in some deductions that we are leaving on the table. The following are the deductible mileage rates for 2016:
- Business (including rental activities) Miles 54 cents / mile
- Medical / Moving Purposes 19 cents / mile
- Service of Charitable Organizations 14 cents / mile
You’ll be surprised how fast the miles add up!
The most important part of deducting these miles is keeping accurate records. Many who once had company cars remember having to record their daily usage of the car and then reporting them at the end of the year.
Some of the miles you drive may not be deductible based on certain income or deduction limitations. As always, consult with your CPA or tax preparer in determining if this strategy will work best for you. An example of a limitation include the 10% AGI income floor for medical deductions. Miles are included in that.
This information is not intended to be a substitute for specific individualized tax advice. LPL Financial representatives do not provide tax advice.