Maximize Your Tax Deductions Using The IRS's "Two Business Location Rule"
by Collin Almeida
If you're like most Americans, your automobile is one of your biggest expenses. Gas, insurance, maintenance, and licensing all add up to a generous portion of average person's income, not to mention actual cost of buying or leasing a vehicle. Wouldn't it be wonderful if you could write-off a considerable amount of these expenses on your taxes? Well, if you own a home-based business, you can. All it requires is some simple documentation and you can start claiming thousands of dollars in automobile-related tax deductions.
How many times have you gone to pick up office supplies while you were out buying groceries? When was last time you ran to bank to make a quick business deposit on way to picking up your children at school? Chances are you do these things all time, but you probably never realized that those miles could be claimed on your taxes. As far as IRS is concerned, you can claim miles as a business expenses if primary purpose for your trip was company-related. Think of plethora of possibilities: making copies at mall while Christmas shopping, buying stamps on your way to pick up dinner, or comparing prices on computers while you shop for a new DVD player. All of these trips and plenty more could be legally claimed as tax deductions.
In addition to errands, you can also claim miles you rack up while commuting to and from a regular job. If you have a home-based business, your commute mileage can be deducted under IRS's "Two Business Locations Rule." According to this rule, you can claim mileage accumulated driving - "from one business location to a second business location". Here's how it works:
Before going to your regular job, handle a business- related task for your home-based company, such as phoning a client, checking e-mail, or balancing books.
On your way to your regular job, make a "necessary business stop." For example, you might run by bank, copy center, or post office.
Drive to your regular job. Reverse procedure at end of day. As long as you follow all four steps daily, you can claim all those commuter miles. While there's no trick involved in claiming these deductions, it does require additional effort on your part. First, you must rearrange your schedule in order to incorporate business stops. While this may seem annoying at first, most home-based business owners find that reorganization boosts their overall efficiency. For example, instead of running a dozen separate errands during a week, those can be combined into only a few, slightly longer trips, which will save you time, energy, and probably gas.