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Claim Your Car Expenses to Save on Taxes
Being in business for yourself is super rewarding. You can choose your hours, choose your specialty, and choose who you work with.
A downside of all that freedom is there is no one to tell you what to do, especially if you’re bootstrapping and doing everything yourself. Sometimes things get missed that could save you money, like claiming your mileage as an expense.
If you’re not claiming your mileage as an expense, you could be leaving hundreds or thousands of dollars on the table.
Look at this case: if you drive 30 minutes a day for your business and you work 200 days per year, that’s roughly $2000 per year that you are not claiming. That’s enough reason to read on.
Logging your mileage is simple. All you have to do is write down your starting and ending odometer reading for each trip, record the date, and note where you went/what the trip was for. You can download a printable mileage logging sheet along with a cheat sheet here.
Each new trip begins at your workplace, so if you work from home you would log your mileage from home. Put a note on your steering wheel or set a reminder on your smart phone to let you know to check your odometer reading each time you leave the house for business.
Common business trips include going to the bank, picking up supplies, going to the stationary store, going to the IT store, meeting clients, and going to networking events.
The rate you will charge per mile or kilometer is predetermined by your tax authority each year. To find yours, google “country name + mileage rate + year.” Read the information you find closely in case there are any exceptions or special rules in your country. (The 2015 rates for Canada and the USA are included in the cheat sheet.)
The mileage rate will be set as a maximum. Don’t charge any less than the maximum. You’re leaving behind tax savings if you do.
If you are bootstrapping and you want to keep as much money as possible in your business, you can pay out your mileage monthly and reduce the amount of your pay cheque by the amount of your mileage. That way you will be taking out enough to cover your personal bills, but you’ll be leaving enough money for your business to grow.
Tracking your mileage is simple and it’s one of the most effective ways that you can save on taxes. For a cheat sheet and printable mileage log to get you started right away, click here.