June 27, 2018

A Dentist’s Guide: Vehicle Deductions & IRS Mileage Rules

Don’t let IRS mileage rules destroy your vehicle deductions.  You have no choice if you want to deduct the business use of vehicles.  You are face-to-face with the IRS’s business and personal mileage rules. And you face the same mileage rules regardless of how you operate your practice (as a corporation, proprietorship, or partnership).  You find the basic mileage rules in Revenue Ruling 99-7, which pretty much controls whether your trip from home to a location is going to be a business or personal trip.  As a business owner, you want maximum business mileage so as to create the most deductions for you whether you drive one, two, or three vehicles for business.  But you want only legitimate miles. You don’t want to put the IRS in a position where it has to deny your business mileage because you violated the mileage rules.  Mileage violations can make you look like a tax cheat. If the IRS thinks you cheat on your taxes, it is going to open you up for a full-blown examination.

Big Ugly Rule

When you drive from your home to your practice, you are commuting, and commuting creates those ugly non-deductible personal miles.

Example. In the morning, you drive 12.5 miles from your home to your office downtown and return in the evening. Your 25-mile round trip is an ugly commute that produces personal non-deductible mileage.

Eliminate Commuting

Since commuting does nothing but hurt you, let’s eliminate the pain.  To eliminate commuting the easy way, you want an office in your home that qualifies as a principal office. Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements:

  1. You use it exclusively and regularly for administrative or management activities of your trade or business.
  2. You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.

This type of home office creates business mileage for all your business stops for that trade or business, including trips to your regular office outside the home.  Do you still have questions or want to speak to a Dental Business Advisor?  Visit our homepage and chat with us today!