Get Tax Deductions Just By Driving

Driving has become a passion for many tax filers because of the many tax deductions available to them. However, deducting the purchase price, maintenance and operating cost of a vehicle can be a ‘taxing’ experience.

If you maintained detailed records, it is not too late to review last year’s driving for deductions on your 2006 tax return. Moreover, while you’re at it, you should also take a look at what is available to you for 2007.

The following are some guidelines to consider:

You can claim 18 cents a mile for travel related to medical care whether you drove locally or out-of-town. This includes trips to a hospital or a doctor’s office both of which qualify for a deduction on your uninsured medical bills on schedule A.

For those who do volunteer work, you can deduct 14 cents a mile. You must however, itemize these and other deductions on the 1040’s Schedule A form.

If a new job causes you to relocate to a new town or state and your employer did not help with the move, then you may be able to write off 18 cents a mile for your drive there, even if you don’t claim itemized deductions.

The deduction for driving as a business expense is 44.5 cents per mile, which is fully deductible (transportation expense) on Schedule C or C-EZ if you are self-employed, and partly deductible (miscellaneous itemized deduction) on Schedule A if you’re an employee without an expense account.

One reason the business mileage rate is much higher than the other rates is because it includes an allowance for depreciation of the vehicle.

Even though tolls, parking, and the mileage amount can be deducted, other expenses like general maintenance and insurance can not.

If you use your car for business you can choose to calculate actual expenses for gas and other items, like insurance, license fees, upkeep, and depreciation. Although you can choose to figure your actual cost for gas and oil when calculating the deduction for moving, volunteer work, and medical care, you can not claim expenditures for general maintenance, depreciation, and other operating expenses.

Having to decide whether to use the simplified mileage rate or add up actual expenses depends on certain factors like, how much you drive, the proportion of tax-deductible use, and the cost of the car. For instance, by law some large SUVs that are used for business get extra favorable depreciation because they are treated as trucks.

If you are a business driver and lease a car, you can claim either the mileage allowance or actual expenses. There are, however, limits to the deductible amount of your lease payments.

Something to keep in mind is that you can’t deduct a normal commute to work, but you can deduct the cost of driving from one job to another, traveling to your temporary job that’s located away from your normal workplace, and traveling from a home office to make business calls. Deductible driving can also mean looking for a new job, even if you don’t get one.

The business mileage rate increased to 48.5 cents in 2007, while the medical and moving rate increased to 20 cents. The charity rate, on the other hand, remains at 14 cents.

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