Generally, you can subtract mileage on your taxes if the car does not belong to you, but you can only do that in specific situations. An example of where deducting mileage if I don’t own the car is applicable is when you are married to the car’s owner. In such a situation, you need to make sure that the trip you make is legitimate, and if it is legitimate, you can deduct the mileage.
Tax deductions on the expenses of a car are only valid if you use them for work or at least your business. But if you are deducting mileage on your taxes for personal reasons, the IRS will not allow you to do it. Personal purposes include commuting from your home to your workplace. But suppose the primary purpose of using the car is a trip for business, for example, visiting customers on-site or buying business supplies. In that case, the IRS allows you to deduct mileage on your taxes even if you don’t own the car. It is essential to note that you can include personal errands during your trip as long as 50% or more of that trip is strictly to do with your business or work.
Can I Deduct Mileage on My Taxes if the car Does not belong to me and I’m Not a Marriage Partner to the owner?
As aforementioned, you can deduct mileage on your taxes even if the car does not belong to you as long as you are married to the owner of the car and you are engaging in work or business-related travels. But what if you are not married to the owner? If that’s the case, you cannot deduct mileage on the car regardless of whether you are using it for business-related purposes or not. However, if you pay another person to drive you to your work-related trips using their cars, you can use the payment as a legitimate deduction. Still, the person who receives the payment will need to report the money they received as income during their tax declarations.
What Methods Are Used to Deduct Mileage if the Car Does Not Belong to Me?
The IRS recognizes two primary mileage deduction methods; the actual expense method and the standard mileage rate. The standard mileage rate is not constant, and it is set by the IRS yearly. For example, in 2021, the deduction rate was 56 cents for every mile, and in 2022 the deduction rate was 58.5 cents for every mile. Therefore, if you need to deduct 50 miles worth of mileage in 2022, you will need to multiply the 50 miles with the deduction rate, which means you will get a mileage deduction of $29.25.
On the other hand, the actual expense method usually requires a list of all the expenses used to own the car, including the repair expenses. For that reason, the standard mileage rate is the easiest to use. The good thing is that whether the car belongs to you or not, you can use either deduction method. However, the option is limited if you have owned the car for only one year. Typically, you are only supposed to use the standard mileage rate if you have owned the car for only one year. Only after the second year can you use either deduction method. The recommended deduction method is the standard mileage rate if you lease your car.
How Can I Calculate for Business Mileage?
The best way to know your mileage is by actively monitoring it at all times. That way, you will find it easy to make your reports. The IRS clarifies that you should report your mileage as soon as you are done with your trip. You can monitor your mileage manually, or you can make your work easier by using one of the many mileage tracker apps available. With a mileage tracking app, you will find it easy to determine your business portions and personal trips. You will find it easy to calculate your business mileage when the tax season comes with that information.
Can an Employee Deduct Mileage?
When it comes to whether an employee can deduct mileage, the answer is; it depends on the circumstances. If you are a business owner, you will require your employees to travel from one place to another for business-related purposes. However, if you don’t have enough cars, they may use their cars for business-related purposes. Your employees may deduct mileage to reduce their tax obligations in certain circumstances. One of the situations, when your employees can deduct mileage, is if you don’t reimburse them for mileage after they have used their cars to run business errands. But if you include the reimbursement as part of their taxable wages, they cannot deduct mileage. For example, if you have driven 20 trips averaging 20 miles per trip and 12 of the trips are business-related, you will have covered 240 miles of business-related trips. For that reason, if you are legally allowed to use the standard mileage rate, you can deduct around $140.4 from your tax obligations if we go by the 2022 rates.
As you can see, the question about deducting mileage if I don’t own a car does not have a straightforward answer. Therefore, it would be helpful to consult a tax expert or an attorney to get the best advice about your situation.