Use the Business Mileage Rate or Submit for Reimbursement?
You can submit your business miles driven to your employer for reimbursement or you can claim the deduction yourself on your federal income tax return…but you can’t do both. That would be double dipping. If you’re self-employed then the choice is easy: there is no choice but to submit for the business mileage rate on your tax return.
But if you’re driving your car for your boss then how do you decide whether to use the business mileage rate or submit your miles driven report to your employer for reimbursement?
And then there’s the secondary question: do you submit the business mileage rate (aka the standard mileage rate) or actual expenses? Most people submit the business mileage rate rather than actual expenses because the business mileage rate is much easier as far as record-keeping is concerned. However, both methods require accurate and detailed records. Keeping a notebook in your car is recommended. There are also now smartphone apps that keep track of business miles for you. They use a GPS to calculate miles and they’ll let you add notes so you can keep track of reasons for travel (yes that’s one of the requirements for record keeping when you claim the business mileage rate on your tax return).
When the Employer’s Reimbursement Rate is Lower than the Business Mileage Rate
Sometimes the rate your boss uses for reimbursing business miles driven is lower than the IRS business mileage rate. They can do that, you know. A business owner can reimburse his or her employees at whatever rate he or she chooses. It’s their company, after all.
If this is the case then you can submit for reimbursement and then submit again to the IRS for the difference. In the end you get the full business mileage rate, whatever it is that year (for 2013 it’s 56.5 cents per mile) but you will be filling out the paperwork twice: once for your boss and once for you the IRS on your federal income tax return.
When You’re Self-Employed
Here of course you’ll be submitting your business miles yourself as a business tax deduction. Your business mileage will be reported on Schedule C, Profit or Loss From Business. You are considered self-employed whether or not you also work for someone else. You can work for a company during the week and then have your own business on the weekends for which you have to drive. Use Schedule C and claim your business mileage rate there.
You have to own the car or at least lease it. Since you probably also use the car for personal driving, you have to find a system to keep track of personal vs business miles driven.
For driving to your office, those miles don’t count. But if you stop on the way to work to do some business (even getting the mail) then those miles count. This is assuming your self-employment situation involves an office you have to drive to. But it also counts if you drive the company car to work and ask for reimbursement for business miles.