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BUSINESS MILEAGE FOR SOLE-PROPRIETOR

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Level 3

My client is self-employed providing dental billing services to a few clients.

She works out of her home and drives to and from the clients to perform her services.

Is the mileage deductible on the car expense line of Schedule C?

Thank you.

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Level 15
Level 15

Seems like it, you may want to pull up Pub 463 for the rules about business mileage.


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Yes of course.  You will need the beginning miles ending miles and business miles - those are the miles

he drives visiting clients and can deduct from his office or home.  You also should include for no benefit his commuting miles that he drives to and from his office so you will wind up with total miles which include business miles which are deductible, personal miles (non-deductible and commuting miles (non-deductible).  You also need the make and model of the vehicle (e.g. 2018 Ford F150).  The first year you have a choice of using actual expenses (oil changes, repairs, car insurance, gasoline) or standard miles.  If you use the standard mileage rate you must stick to it for the life of the car and if you use actual expenses (you get a percentage of the costs  e.g. if business miles are 15% you get 15% of the costs).

 

 

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Level 3

Since she drives to her clients and back I understand these are deductible business  miles and not treated as commuting miles. Is this correct?

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Level 3
Level 3

Driving from your home business to a client location or for business errands is not considered commuting, as long as you can meet the principal-place-of-business qualification.  Hopefully your client qualifies to have a home office by using a space exclusively and regularly for business.  

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Level 3

So she cannot treat the mileage to and from her home to her business clients unless she qualifies for a home office deduction?

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Level 3
Level 3

Declaring a home office satisfies the requirement that home is a place of business so that travel from home to business (which is non-deducible commuting) is instead deductible business to business travel.


If the taxpayer has a home office from which the trade or business is managed, and there is not another location from which substantial management or administrative functions are performed, he or she will be eligible for a home office deduction even if the taxpayer performs services outside the home.  Administrative or management activities include billing, maintenance of books and records, ordering supplies, setting up appointments, and forwarding orders and writing reports.  But the space in the home has to be used exclusively and regularly for business activity. 

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Level 15

Research the Soliman (sp?) case from decades ago.  A doctor (New York, I think) established the modern day OIH requirements.

https://search.yahoo.com/yhs/search?hspart=avg&hsimp=yhs-securebrowser&type=8153&param1=e0f50a024ae1...

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Level 11

He was an anesthesiologist who worked in Maryland and Virginia.  "Soliman lived in a condominium in McLean, Virginia. His residence had a spare bedroom which he used exclusively as an office. Although he did not meet patients in the home office, Soliman spent two to three hours per day there on a variety of tasks such as contacting patients, surgeons, and hospitals by telephone; maintaining billing records and patient logs; preparing for treatments and presentations; satisfying continuing medical education requirements; and reading medical journals and books."

And still he lost at the Supreme Court, so Congress amended the law.  If someone has an area used exclusively for business, two or three hours a day, it's a home office.  If someone works from the kitchen table an hour a week, sending out bills, it's not. 

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Level 15

(I couldn't spell anesthesiologist 🤣..) 

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Level 3

Ergo then... to meet the principal-place-of-business qualification one must have an office at home?

The Car Expenses with no commuting miles then would be reported on Line 9 - Schedule C, and the other expenses such as the applicable percentage of rent and utilities would be reported on Form 8829.

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Level 3
Level 3

The requirement to establish that home is a principal place of business is essentially the same as the requirements for a home office.  

yes, mileage on Sch C and home expenses prorated. 

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Level 13

Maybe this will be helpful: "Ergo then... to meet the principal-place-of-business qualification one must have an office at home?"

You would Not have the first trip or part of the trip as being From the office, but from Home, unless Home has a Home Office. The principal place of business is a Place. It isn't by definition the Home, unless it meets the requirements as defined. The principal place of business might be an office downtown, for instance.

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Level 3

So if there is no home office, the first trip to a client's location would be commuting miles as would the last trip home at the end of the day. All the miles during the day for business purposes, such as going to different clients would be deductible business miles.

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Level 3
Level 3

Exactly. 

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Level 15

"....If you use the standard mileage rate you must stick to it for the life of the car".

@Italiantaxman 

The above statement is not true - using the SMR & straight line depreciation in the year the vehicle is placed in service allows one to use actual in the future for that vehicle.

Using actual expenses in the year the vehicle is placed in service means one must continue to use actual expenses for that vehicle in future years.

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Level 3

I was under the impression that if you used the standard mileage rate then you don't factor in depreciation or other expenses as they are all built into the standard rate.

in this case my client used the actual expense method in 2018 and is using it again and does get a depreciation deduction in both years.

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Level 15

The SMR *does* have a depreciation component in it; and that component is considered when the asset is sold (is an IRS stated amount per business mile, per year).

   https://www.irs.gov/pub/irs-drop/n-19-02.pdf

Using SMR & straight line in the first year DOES allow switching back/forth in subsequent years.  In those subsequent years IF actual is chosen (i.e is better such as a year with major repairs) the depreciation is taken using the straight line method.

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Level 12

@abctax55 wrote:

Using SMR & straight line in the first year DOES allow switching back/forth in subsequent years.  In those subsequent years IF actual is chosen (i.e is better such as a year with major repairs) the depreciation is taken using the straight line method.


 

Maybe I'm misreading what you wrote, but using Straight Line depreciation (actual expenses) in the first year does NOT allow you to switch back and forth.  Using Straight Line in the first year would still be part of MACRS (§168) which would therefore exclude the ability to switch back and forth.

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Level 15

"Using SMR" translates to Standard Mileage Rate.  As I stated earlier, the SMR *has* a depreciation component in it.  Sorry if I confused you.

(In Lacerte at least)  I always enter the vehicle AND select the straight line depreciation option to avoid future booboos if/when switching to actual vehicle expenses is advantageous.

I have no idea what options PS offers.  Additionally, Lacerte provides warnings that switching to SL is required if business use drops below 50%

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Sorry, disregard my part about the office as I reread it as she not he is working from home.

 

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Level 11

@wethepeople   She works out of her home and drives to and from the clients to perform her services.

There is nothing here that indicates she does any work at home, or does any work at home other than at the kitchen counters when she isn't baking cookies. 

It's almost as if the question is phrased to get an answer that assumes facts not stated.  

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Level 3

She does administative work at home, such billing clients and other functions to help serve her clients.

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Level 11

You are being vague about whether she has a separate office area, and how much time she takes to do this.  Is that on purpose?  I don't really care, but the IRS auditor will ask.