It depends on your circumstances and which one saves the most money year over year. Is it better to claim miles or use the actual expense method? ![]() Therefore, claiming actual expenses and the mileage rate essentially takes the same deduction twice. The mileage allowance is simply the IRS letting you use a flat mileage rate to determine what you can claim. Nor can you claim depreciation and then take miles on top of that. You can not claim gas or maintenance if you use the standard mileage method. The thing to remember is that it's one or the other. Multiply that percentage by the total cost to get your deductible amount. Once you've determined your total cost of driving, you must calculate what percentage of your miles were for business. We go into more miles about using the actual expense method here. On the one hand, you can track how many miles you drove for your deliveries and claim the standard mileage rate.Īlternatively, you can add up all the costs of driving, which the IRS includes: Those with home offices can write off $5 per square foot rather than adding up all the housing costs and calculating a percentage of the space.Īnd you can claim the standard mileage rate of 62.5 cents per mile (2nd half of 2022) instead of adding up all the various expenses. They let you claim a standard tax deduction as opposed to itemizing. The IRS offers some flat rate options in different areas to simplify filing taxes. Understanding mileage versus actual expenses. Either way, claiming vehicle expenses is often a way to significantly reduce your tax burden. The IRS lets you decide whether to calculate the actual cost of driving or claim a flat rate per mile. Even though it feels like you made a thousand dollars in a week, the cost of driving takes a big bite out of those earnings. Driving a mile or more for every dollar earned is not uncommon. It becomes even more significant for gig workers in rideshare and delivery. When you add everything up, it costs a lot. There's a reason the IRS lets you write off such a significant amount per mile (62.5 cents in the second half of 2022). In that way, it acts like a credit card on wheels. Either when you replace things like the tires or timing belt or receive less when you sell your car. Those are expenses that will have to be paid at some time. Each mile gets you closer to big-ticket repair/replacement items. Every mile adds an expense that is paid at a later date. It costs more to drive your personal vehicle than just gas and oil changes. Most of us delivering for delivery services like Instacart, Doordash, Roadie, Waitr, and others put a lot of miles on our cars. Why writing off car expenses is a big deal for delivery drivers You should find a tax professional who can guide you if you need specific advice for your tax situation. The purpose is to educate and inform, helping independent contractors understand how taxes work for them and explaining the related concepts. We'll link to other articles where appropriate, and at the end, we have a list of all articles in the series. For that reason, this is part of a more comprehensive series on gig worker taxes. ![]() It's impossible to cover it all and do it well in one article. ![]() There are a lot of aspects related to taxes for delivery drivers in the gig economy. Therefore, many examples will be related to food delivery companies like Grubhub, Shipt, Amazon Flex, DeliverThat, and many larger companies. You should seek out a tax professional who can help you with your locality and the related taxes.ĮntreCourier is mainly about the business side of delivery work in the gig economy. Because there are so many state and local governments, we don't dive into local or state taxes. Other countries have their own tax laws that may or may not be similar. This article is about how the car expense deduction works in the United States. The most important rule for claiming auto expenses. ![]() Understanding mileage versus actual expenses.Why claiming your car is such a significant write-off.We'll talk about how it works to claim your car as an expense item on your independent contractor taxes. The loss of value is known as depreciation. That loss of value is a deductible expense (unless it's like this thing and it's already lost all its value).
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