If you feel like you spend more time driving than anything else in your business, you may be right. It’s not uncommon for some full-time agents to drive upwards of 33,000 miles per year for business. If the average speed driven is 50 MPH, that’s over 12 hours behind the wheel each week!
So, how do you make the most of all your driving? Do you invest it listening to motivational podcasts or Gary Keller’s The Millionaire Real Estate Agent? Earmark the time for meditative introspection? If yes, good for you! If you’re like most of us, however, clock-conscious and somewhat frazzled – your driving time is probably catchup time: returning calls, scheduling appointments, and following up with agents and clients.
Regardless, of how you use your driving-time, life behind the wheel offers one key benefit (at least we tax-pros think so) – it’s all deductible! In fact, for most realtors, auto expenses are their most significant, tax-cutting deduction.
There are articles on OvernightAccountant.com that discuss the relationship between Autos and the Home Office and easy ways to Track Business Driving. In this article, we’ll introduce the options real estate agents have for deducting auto use; the Standard Mileage Rate and Actual Auto Expenses. Then, we’ll flesh out the pros and cons of the standard mileage rate.
Deduction Options: Determining which method to use to deduct your auto mileage; actual cost or the standard mileage rate, is a consequential decision that will impact your taxes and recordkeeping for years to come. The Standard Mileage Rate is the simplest method for deducting auto use and is, therefore, an excellent choice for many agents. For some agents, however, the actual cost method will yield a higher deduction. Which deduction is best for you? The answer depends on quite a few variables. Learn more about deducting actual auto expenses. The remainder of this article will flesh out the pros and cons of the standard mileage rate.
Standard Mileage Rate: Deducting auto use via the Standard Mileage Rate is simple: Track your business miles and deduct an IRS-provided amount for each mile driven. The per-mile rate changes from year-to-year but generally runs between fifty-four and fifty-nine cents per mile ($0.58 for 2019). When completing your return, the IRS will also want to know the total miles you drove each business vehicle during the year as well as miles driven to and from your W2 job or principal place of business (also known as commuting miles).
Pros of Standard Mileage Rate: There are some definite benefits to utilizing standard mileage. Here’s a brief list:
Cons of Standard Mileage Rate:
Takeaway: Using the standard mileage rate will benefit Real Estate Agents who use moderately priced, fuel-efficient vehicles for business. Agents who are extremely busy or lack the discipline required to track every dollar spent on their auto will also appreciate its simplicity. If, on the other hand, you drive a luxury vehicle or one that gets poor gas mileage, you may find the actual cost method financially advantageous.
Summary and Invite: We hope this article has helped you understand deducting business use of your auto by using the standard mileage rate. If you’d like to learn more about cutting your most significant expense, TAXES, check out our Real Estate Agent Tax Cut Library. The Real Estate Agent Tax Cut Library includes over eight hours of video broken into twenty-nine searchable volumes and covers every possible deduction a Real Estate Agent can take on their tax return. Our Broker Version will help your entire agency cut their taxes! We also invite you to browse our courses.
All courses and articles are for informational purposes only and do not constitute tax advice. Taxes are complicated - do not act on course information without consulting a professional. Always refer to treasury regulation before making any tax decision. Read the full disclaimer.
Great course!- Donna L, Phoeniz, AZ, 1099-NEC & 1099-MISC Training Course Course
This course package is thorough and will give you a solid handle on how to optimize your business expenses to minimize your taxes and keep appropriate records to handle any IRS challenges. Only want to dive into a particular topic? Jump to that video and scan forward to where your issue is addressed. Or watch the whole series to learn it all!- Josh, Charles Town, WV, Real Estate Agent Tax-Cut Library, Agent Edition Course
Your video was perfect for us. It was easy to follow and understand. I was able to complete our tax return.- Chakima H, Mableton, GA, 1120-H Basics Course
I haven’t practiced in the accounting field in quite some time and wanted a refresher. The Overnight Account course 1099-Misc Basics was very helpful! It was simple to follow along and understand each section. I would highly recommend this course! Staff were quick to answer my question as well. I love that I can review the modules again, if needed, at any time. I will definitely be using them again for more classes.- Tammy, Anchorage, AK, 1099-MISC Basics (Training Edition) Course
I haven’t practiced in the accounting field in quite some time and wanted a refresher. The Overnight Account course 1099-Misc Basics was very helpful! It was simple to follow along and understand each section. I would highly recommend this course! Staff were quick to answer my question as well. I love that I can review the modules again, if needed, at any time. I will definitely be using them again for more classes.- Tammy, Anchorage, AK, 1099-MISC Basics Course