The holidays are over and we are well into January, so it’s time to start thinking about getting ready for tax time.
One of the joys of being an independent contractor is that we get to write off a number of business expenses against our income, effectively lowering the amount of federal and sate income taxes that we have to pay.
One of my major expenses is my car expense. The IRS gives us two ways to track this, one way is to add every possible expense related to operating your car for business and the other is to claim a preset amount for each business mile that you drive.
In 2015 the amount that you are permitted to claim was .575 per mile, or in easier to understand terms, for every 1,000 business miles that you drive, you can deduct $575! I drove about 17,000 miles for business last year which gives me a deduction of over $9,700!
I believe that the Standard Mileage rate for 2016 is .54 (reflecting lower gasoline costs), but check that with your accountant.
This level of deduction almost demands that you keep careful records. For the past few years I have kept a small mileage journal in my car and dutifully recorded each trip’s starting and stopping mileage from the odometer.
Then I laboriously copied that info each month into a spreadsheet, which I then tallied up at year end. That’s a lot of work for sure!
I recently discovered an app for the iPhone called Everlance – http://everlance.com – (The Android version is coming) that will take over the recording of my business mileage. It uses the phone’s built in motion sensors and the built in GPS to track where you go. After the trip is over you get to swipe it right to mark it as business, or left to mark it as personal.
An added benefit is that the app will also allow you to track other business expenses by scanning receipts.
The app is free and you are able to export the saved data to a spreadsheet which can then be added to most tax software.
They have a very comprehensive blog at http://blog.everlance.com with useful articles, Tutorials and even some tax advice.
It’s a good app and so far I am happy with it. Give it a try and don’t lose out on the mileage deduction!
