| Tax Tidbit #1 |
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Tax Tidbits: A series of five articles
presented by Wayne M. Davies of www.YouSaveOnTaxes.com.
Short but sweet nuggets for the Small Biz Owner and/or
Self-Employed Person, each morsel serving up a specific tax
reduction strategy guaranteed to tickle your monetary
taste-buds.
The U.S. Tax Code is so big, there's only one way to
digest it: one little nibble at a time.
Just like a piece of candy, one small bite of tax
knowledge can give you one very delicious deduction!
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Tax Tidbit #1:
How To Turn Non-Deductible Commuting Mileage Into A
Legitimate Business Expense
-- by Wayne M. Davies
Copyright 2003 Wayne M. Davies Inc.
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For most folks, commuting mileage is a non-deductible
expense -- unless you know the little tax trick I'm
about to reveal.
The non-deductibility of commuter miles is painfully
true for the employee who fights rush hour traffic every
day, twice a day, for 5 to 10 hours a week.
All that hassle, and what does he have to show for it?
Just gas money down the drain, not to mention the wear
and tear on both his vehicle and his stress-o-meter.
You can deduct virtually all your mileage, including the
miles you log from your home to the office or other place of
business, if you meet the following two criteria:
1. You are a small business owner or self-employed
person, and
2. You have two offices or work locations: one outside the
home (Office #1) and one inside the home (Office #2).
Having two offices is very common for today's self-employed
professional. The store owner, the shopkeeper, the salesman,
the plumber, the consultant -- all these folks are
typically self-employed and have two offices:
one where they meet with the public (Office #1), the other
at home, where they get their paperwork done (Office #2).
Here's how it works:
Every day you get up and "go to work." But you don't
get in the car and drive to Office #1 right away. If you
did that, even as a self-employed person, you would be
racking up non-deductible commuting miles, just like the
employee.
Instead, you grab a cup of coffee and head to Office #2
first, which takes all of 30 seconds.
After working in Office #2 for awhile, then you hop in
the car and head to Office #1, where you work for the bulk
of the day.
Then, when you're done at Office #1, you get back in the
car and go "home" -- except when you get inside your
house, you don't head for the living room, you go straight
to Office #2, where you finish up your daily routine
with a few final minutes of paperwork.
What have you just done?
You daily round-trip "commute" is now a business deduction,
due to a simple tax loophole that says:
Any miles driven between two business locations are
deductible business miles.
The fact that one of those two locations just happens to be
your Home Office is fine and dandy with the IRS.
By following this route each day, you can save hundreds,
even thousands of dollars in taxes.
The proof is in the pudding:
Your round-trip "commute" is 20 miles per day.
20 miles X 5 days = 100 miles per week.
100 miles per week X 50 weeks = 5,000 miles per year.
5,000 business miles X .36 cents = $1,800 deduction
NOTE: The mileage rate for 2003 is .36 cents per mile.
The mileage rate for 2004 is .375 cents per mile,
so this deduction will increase to $1,875 in 2004.
So, you just got yourself a nice $1,800 deduction --
a deduction that you've probably been entitled to
for years but didn't know it.
$1,800 deduction X 35% income tax rate = $630 in actual
tax savings. (This example assumes a 30% federal tax
rate and a 5% state tax rate. Your actual tax rate
may be different.)
Six hundred and thirty bucks . . . every year. . .
. . . Hmm, mmm, good! Now that's a tasty little morsel!
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Wayne M. Davies is author of the best-selling ebook,
"The Tax Reduction Toolkit: 29 Little-Known Legal Loopholes
That Will Reduce Your Taxes By Thousands"
(For Small Business Owners and Self-Employed People Only!)
http://www.YouSaveOnTaxes.com/toolkit
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