Can I deduct my mileage?

Many small business owners do a lot of driving for their business, whether it’s driving to client meetings, or whether it’s frequent trips to the office supply store or post office.

You are allowed to take a deduction for automobile expenses on your income tax return when your car is used for business purposes.  This includes driving to client meetings, other business (office) locations from your home office, trips to the office supply store, post office, your accountant’s office, etc.  As long as the trip is for business purposes, it is deductible. 

You can take your automobile expenses deduction it two ways: you can calculate your actual expenses (pro-rata based on business use of the vehicle), or you can take the standard milage deduction.  To take the standard mileage deduction you will need to keep track of your business miles for the year, then multipy those miles by the IRS mileage rate for the year.

The standard mileage rate for 2006 is 44.5 cents.  The rate increases to 48.5 cents per mile in 2007.

Caution: you can switch from the standard mileage rate method of deducting automobile expenses to the actual expense method.  However, if you use the actual expense method for the first year your car is used for business, you will not be able to switch to the standard mileage rate method for future years, so be cautious about which method you choose in the first year your car is used for business.

Tags: ebay income taxes, automobile expenses