Auto Expenses

In Actor Speak

 

As you go through the day doing things to promote your career you are accumulating business miles.  For almost any event that you are claiming as a deduction; acting class, meeting with an agent, rehearsal, an audition, the purchase of a prop or other business item, there is usually some degree of travel expense involved.  Too often we forget to write down every trip we take, a routine visit to the office supply store to buy printer cartridges or paper for our resumes. If the trip was taken for business purposes, it is deductible.

Whether you are driving your own car or you are using public transportation, you are entitled to write off the cost of that business mileage.

If you are using your own car this is often huge expense, but even using public transportation, as is the case for many living on the east coast, can still be a significant expense.

There are two common questions we get asked.  First, "What's a good average for business mileage?"  That answer is easy.  There is no such thing as an "average" and anyone who tells you otherwise is setting you up for a problem with the IRS.

Some people may have a lot of auditions, others will make up for that by taking a lot of classes and still others do a lot of plays for showcasing and spend a lot of time going to rehearsals.  And then there are some people who drive their cars very little throughout the year for this business.  Mileage for those classes, auditions and other job search activities are deductible but you MUST be able to document the miles and/or expenses incurred to receive the write-off.

So how difficult is it to keep sufficient records to prove these invaluable deductions?  The answer is actually easier than you may think.  Yes, you should keep records whenever you drive for business and then, whatever the truth is--whatever you can prove--that's what you put on your return. 

Receipts from acting classes, photographers, and emails from your agents for your auditions are proof you drove (or traveled) to those locations.  In addition to keeping track of those receipts, we urge you to keep a mileage log or use a daily planner to track your appointments .  How tough is it to write down where you go each day?  Notate those miles to and from agent visits and auditions daily and soon it will become habit.  It's called keeping a schedule of your activities and if you don't know where you are going each day then how do you know you are where you are supposed to be?

It’s that simple.  At the end of the year, keep the log or planner with your tax records (it is arguably the most important tax record you can bring to an audit as it proves ALL of your activities.)

TIP:

Obviously if you attend classes or auditions at the same location you don't have to write down the mileage for each trip ASSUMING that your starting point (generally your home) and your ending location (the sight of the classes) is also the same for each trip.  Don’t forget to account for the mileage coming and going. Mapping websites (i.e. "Mapquest", " GoogleMaps") are of great value here.

For those who use public transportation:

To a degree, the record keeping is easier when you regularly use a cab or bus.  All you need to do is keep the ticket stub or receipt and note that the specific cost is tied directly to a specific business expense, i.e. audition or class.
  
Bear in mind the subway expense is usually a monthly purchase so, not unlike with an auto, you must be able to account for the percent of business usage for ALL travel during the month. The percent of business use will be used to determine the amount of your actual monthly pass that can be written off.

Again though, keep a schedule or journal of your business activities as that "contemporaneous" record of your year in the business carries a lot of weight at any audit to prove a lot of your involvement in the industry.

TYPES OF MILEAGE:

With our cars it is an on-going battle to prove the deduction.  There are four specific numbers that the IRS demands you be able to prove and THEN there is the question of which method you will use to write of your costs.

So, as easy as it should be to have these records already, DON'T estimate and DON'T make up numbers and, most importantly, DON'T let someone else do it for you.

Here are the four sets of numbers the IRS wants you to be able to prove on your tax return if you drive an automobile for business purposes.

1)   TOTAL Mileage throughout the year.  Obviously this is easy to prove if you simply write down the number on your speedometer at the beginning of the year and then at the end of the year.  If you have neglected to do so, receipts for car repairs and oil changes usually have the speedometer reading on the paper.  Comparing at least two of them and then taking an average for the days/months between them and then multiplying for the entire year is considered proof enough for the IRS.  BUT, as it isn’t a definitive number you may be hurting yourself in the end by not being able to offer a complete and accurate number.

2)   Business mileage throughout the year.  This is the single most important number because if you are using the standard mileage amount (for 2016 the standard mileage rate is .54 cents a mile), this is the number you multiply against your business mileage to learn your deduction.  This is mileage to and from auditions, acting classes, rehearsals (for a play IF you aren’t getting paid), photo sessions, and meetings with your agent or manager.  Interestingly a number of our clients will come in thinking they don’t have enough mileage to make this worth their while.  But if you have a receipt for business expenses at Office Depot, you probably drove there to make the purchase.  And that would be true of all your business receipts.  Add these with the trips previously listed and you can usually come up with a substantial number.

Just go through your calendar or day to day schedule and write down the places you went.  You probably traveled to the same locations over and over again throughout the year.  If you didn't record the mileage to each place at least once then go on line to MapQuest and figure it out.  Then multiply it times the number of visits.  That's your business mileage.

Don't forget the return trip counts too.

3)   Commuting Mileage.  Commuting mileage means the mileage driving to work and back.  Commuting miles are NOt deductible because the “normal” person has to spend their money paying for these trips every day. Therefore, to keep things fair, the IRS has similar expectations for you to be able to account for commuting miles as well.  If you have a “regular” job in addition to your acting income, the driving to that work and back usually constitutes all the mileage you have to show. 

However, because even a "full time" actor may only need to work a dozen times (or less) a year to make a living they may not have a very substantial figure of genuine commuting mileage to show here.  In those cases we typically suggest to our clients they show more commuting mileage than they probably truly have.  Why?  Two reasons.  One, to help eliminate the chance of an audit by Two, showing the IRS that you understand the difference between commuting miles (driving to work and back) that you are NOT allowed to write off and business miles that you can take as a deduction.  We believe that losing a few hundred dollars of legitimate deductions here may be worth the time and money you might lose if you were audited as a result of placing what might be very real but, what could appear to an IRS employee, unreasonable numbers on your return.

4)   Personal Mileage.  This number is derived from the Total Mileage after subtracting both the Business and Commuting mileages.  Anything left is Personal Mileage.  This would be driving to the store to buy groceries, visiting your beau, going to church, trips to visit relatives and driving the kids to school.  Obviously for almost everyone this should be a fairly reasonable figure. By placing a small number for personal usage on your return you are providing the IRS with evidence that you don't understand auto expenses and may well have inflated your car's business usage to get a greater refund.

It is this total picture of your driving that indicates to the IRS your understanding of the rules and helps to prove the overall legitimacy of your business mileage.  Too often actors have a tendency to over estimate their business usage and by neglecting to include sufficient commuting and/or personal miles, for obvious reasons this deduction can become a target for auditors.

THE METHODS:

1)     Actual Expenses

This method can be the most effective for those who lease their car or who have spent a considerable amount to purchase their car.  By writing off the year’s lease payments or by depreciating the value of the car over five years and adding all of the possible expenses of operating that car—Insurance, Gasoline, Repairs, even down to Car Washes—you can incur a considerable amount of expense.  However, ALL of those expenses are multiplied by the percent of business usage (the percent of your total miles used for business), to reach the actual amount you will be able to write off. 

2)     Standard Mileage

Quite simply this method multiplies your Business Miles times the amount that the IRS has determined for that year.  As we show below, in 2015 that amount is 57.5 cents per mile.  Therefore, for every 1000 miles you can prove for business purposes the write-off is at least $575.00.  If 30 to 50% of the use of your car is for business and the average person drives 12,000 to 15,000 miles in a year, this adds up quite quickly.


What are the standard mileage rates for 2017, 2016, 2015, 2014, 2013, 2012 and 2011?

2017

(NOTE: This for reference only as we are preparing your 2016 return. On this return we will be using the 2016 numbers further below.)

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • Standard Mileage Rate for Business is 53.5 cents per mile driven, down from 54 cents for 2016
  • The Medical and Moving related mileage is 17 cents per mile driven, down from 19 cents for 2016
  • For Charitable related mileage 14 cents per mile driven in service of charitable organizations

2016

Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • Standard Mileage Rate for Business is 54 cents per mile, down from 57.5 cents for 2015
  • The Medical and Moving related mileage is 19 cents per mile driven, down from 23 cents for 2015
  • For Charitable related mileage 14 cents per mile driven in service of charitable organizations

2015

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be: 

  • Standard Mileage Rate for Business is 57.5 cents per mile for business miles driven, up from 56 cents in 2014.
     
  • The Medical and Moving related mileage is 23 cents per mile driven for medical or moving purposes, down half a cent from 2014.
     
  • For Charitable related mileage the rate remains at 14 cents per mile driven.

 

2014

The rate for business miles driven during 2014 decreased 1/2 cent from the 2013 rate.  The medical and moving rate is also down 1/2 half cent from the 2013 rate.  Therefore, beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) are: 

  • Standard Mileage Rate for Business was 56 cents per mile for business miles driven.
     
  • The Medical and Moving related mileage was 23.5 cents per mile.
     
  • For Charitable related mileage the rate remained at 14 cents per mile driven.

2013

The rate for business miles driven during 2013 increased 1 cent from the 2012 rate.  The medical and moving rate were also up 1 cent per mile from the 2012 rate.  Therefore, beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) were: 

  • Standard Mileage Rate for Business was 56.5 cents per mile for business miles driven.
     
  • The Medical and Moving related mileage was 24 cents per mile.
     
  • For Charitable related mileage the rate remained at 14 cents per mile driven.

2012

  • Standard Mileage Rate for Business was 55.5 cents per mile for business miles driven
     
  • The Medical and Moving related mileage was 23 cents per mile
     
  • For Charitable related mileage the rate remained at 14 cents per mile driven.

2011

  • Standard Mileage Rate for Business from Jan. 1 through June 31, 2011 was 51 cents per mile for business miles driven.
     
  • Effective July 1, 2011 the Standard Business rate increased to 55.5 cents per mile.
     
  • The Medical and Move-related mileage was 19 cents per mile
     
  • For Charitable related mileage the rate was 14 cents per mile driven.


Where can I find more information on the use of my car for business?


Car expenses and use of the standard mileage rate are explained in chapter 4 of Publication 463, Travel, Entertainment, Gift, and Car Expenses available from the IRS website.


In the Words of the IRS:

Business Use of Car

If you use your car in your job or business and you use it only for that purpose, you may deduct its entire cost of operation (subject to limits discussed later). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.

You can generally figure the amount of your deductible car expense using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, before choosing a method, you may want to figure your deduction both ways to see which gives you a larger deduction. For 2016, the standard mileage rate is 54 cents a mile for all business miles driven. If you use the standard mileage rate, you can add to your deduction any parking fees and tolls incurred for business purposes.

To use the standard mileage rate, you must own or lease the car; the car must not be used for hire, for example as a taxi; you must not operate two or more cars at the same time, as in a fleet operation; you must not have claimed a depreciation deduction using the Accelerated Cost Recovery System (ACRS) or the Modified Accelerated Cost Recovery System (MACRS) on the car in an earlier year or any method other than straight-line for its estimated useful life; you must not have claimed a Section 179 deduction on the car, and you must not have claimed actual expenses after 1997 for a car you leased. You cannot use the standard mileage rate if you are a rural mail carrier who received a "qualified reimbursement."

Further, to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use the standard mileage rate or actual expenses.

However, for a car you lease, you must use the standard mileage rate method for the entire lease period. For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that are after 1997.

To use the actual expense method, you must determine what it actually cost to operate the car for business purposes. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to business miles driven.

Other car expenses for parking fees, and tolls attributable to business use are separately deductible, whether you use the standard mileage rate or actual expenses.

Generally, the Modified Cost Recovery System is the only depreciation method that can be used by car owners to depreciate any car placed in service after 1986. However, if you used the standard mileage rate in the year you place the car in service, and change to the actual expense method in a later year and before your car is fully depreciated, you must use straight–line depreciation over the estimated remaining useful life of the car. There are limits on how much depreciation you can deduct. For cars first placed in service in 2003, the maximum depreciation for that car is up to $10,710. These maximum amounts vary for cars placed in service before 2003. For additional information on the depreciation limits, please refer to Topic 704.

Publication 463, Travel, Entertainment, Gift, and Car Expenses, explains the depreciation limits, and it discusses special rules applicable to leased cars. Also, the amount of the deduction is reduced if you use the car less than 100% for business. Multiply the maximum amount by your percentage of business and investment activity use to determine the deductible amount.

The law requires that you substantiate your expenses by adequate records or by sufficient evidence to support your own statement. For further information on record keeping, refer to Topic 305.

If you are an employee whose deductible business expenses are fully reimbursed under an accountable plan that meets the 3 accountable plan rules, the reimbursement should not be included in your wages on your Form W-2 (PDF), and you should not deduct the expenses.

If your employer uses a non–accountable plan to reimburse you for the expenses, the reimbursements should be included in your wages. Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a non–accountable plan with your wages, salary, or other compensation and report the total on your Form W–2. Your employee business expenses may be deductible as an itemized deduction. For a definition of Accountable and Non–Accountable plans, refer to Publication 463.

Generally, if you are an employee, to deduct your car expenses including expenses that exceed reimbursement under an accountable plan, you must complete Form 2106 (PDF) or Form 2106-EZ (PDF) and itemize your deductions on Schedule A of Form 1040 (PDF). Your expenses will be subject to the 2% of adjusted gross income limit.

If you are self–employed, car expenses are deductible on Schedule C Form 1040 (PDF) or Schedule C–EZ of Form 1040 (PDF), or on Schedule F of Form 1040 (PDF) if you are a farmer.

For more information, refer to Publication 463.


The below links will take you directly to the IRS website for the complete Publications they make available for reading and/or downloading.

Publication 463, Travel, Entertainment, and Gift Expenses

Tax Topic 510, Business Use of Car



2017