One of the advantages of working for yourself is you can write off a lot of different expenses to lower your taxable earnings.
One deduction that is very popular is business mileage.
Any mileage you undertake for business purposes can be converted into a very healthy tax deduction.
The IRS changes the rate at which you can deduct business mileage each and every year.
The change has almost always been fairly small.
The last few years, however, have seen some sizeable increases.
The gas shortages associated with Hurricane Katrina [damaged refineries] and subsequent high oil prices have both had a big impact.
In fact, the rates have increased more in the last two years than they did in the previous eight years combined.
Starting January 1, 2007, the rate for calculating your business mileage deduction goes up to a healthy 48.
5 cents.
To figure your deduction, you simply multiple this figure by the total business miles you drive in 2007.
For example, if you drive 2,000 miles on business in 2007, your deduction would be 2,000 multiplied by 48.
5 cents for a total write off of $970.
Might it be time to start visiting your clients more often?! It is important to understand that this deduction is for the 2007 tax year.
When you site down to prepare your taxes on April 14, 2007 [lol], you will not use this figure.
Instead, you will have to wait until April 14, 2008 when you prepare your taxes for the 2007 year.
By the way, the mileage rate for 2006 is 44.
5 cents per mile.
As you know by now, the key to limiting the pain of your tax bill is to maximize your deduction.
With the business mileage deduction, you can get a very health write off.
Just make sure to document your miles in case you get audited.