Are you a self-employed real estate investor?
This means that you have a ton of business-related tax deductions you can use to your advantage when tax time comes. Mileage is definitely a deduction used by many investors.
How many times have you scouted neighborhoods in search of potential houses you can flip or wholesale? How many times have you driven around putting up bandit signs? Or conducted open houses?
Let’s face it, a hands-on real estate professional is busy and all that travel in your car accumulates over time. Taking advantage of this large tax deduction opportunity shows that you are a responsible real estate professional.
Disclaimer: We are not accountants or tax professionals. We are real estate investors. All that accounting stuff can give us a headache. This lesson has tips and techniques based on our experience that might be helpful in lowering taxes. You should always speak with a tax professional for any and all tax/accounting purposes. Got it? Good.
What Should You Track in the First Place?
You need to track everything for deductions, including
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Car-related costs
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Office expenses
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Advertising and marketing
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Business travel
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Meals and entertainment
As for mileage and vehicle deductions, there are 2 ways to compute – standard and actual.
As for the standard mileage rate for your business, it depends on the annual study of both fixed and variable costs of operating a car. The standard mileage rate for 2017 was down to 53.5¢ per business miles driven from 54¢ in 2016.
The mileage rate constantly changes per year, so make sure to stay up to date with the current IRS table and watch out for 2018’s rate.
From the name itself, the actual expense pertains to the deduction of the actual operating costs of your car, including the repairs, insurance, maintenance and gas.
Is There other Stuff to Consider?
You bet! Other than mileage, you can also track other costs even while using the standard rate, such as parking and toll fees. It’s best to keep receipts for these expenses – physically or digitally.
But, some other expenses are not deductible. Typically, you can’t include the interest paid on your car unless it was bought using a home equity loan. But you can subtract any personal property taxes paid on a certain vehicle despite the choice of deduction method.
What Type of Trips Should You Deduct?
If you don’t go to a physical office or if your office is located in your home, your house is your main place of business. Which means that any trip that goes from your office can be deducted, such as:
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Taking prospects or clients to show listings
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Open houses
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Errands for work, such as going to Staples for office supplies, putting up or handing out print media, food for an open house, going to the post office, and the like
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Trips to hand out or remove fliers, bandit signs, etc.
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Going to meetings, training, seminars, conferences, etc.
How Can You Possibly Keep Track All of This?
A complete mileage log approved by the IRS should contain the following information:
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Total number of miles
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Relevant vehicle expenses such as parking and toll fees
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Date of trips
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Destination, including the name of client, address or business address
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Odometer start and stop
There are different ways to track all this: manually – handwritten form or on a spreadsheet – or through a mileage tracking app.
You can’t deny the fact that manually tracking your deduction takes time and a whole lot of dedication. It’s definitely a huge chore that you’d rather delegate to someone else. Fortunately, technology saves the day.
The creators of DriversNote understand your dilemma. They made an app that puts an end to the manual work and saves you a lot of precious time. DriversNote uses your phone to not only track your trips but also to use the recorded data to create proper documentation to claim your mileage.
Track Trips
Using the app is fairly straightforward and user-friendly. All you have to do is to push ‘Start’ in the app as you go out on your business trip and then press ‘Stop’ when you reach your destination.
The app then automatically registers your trip using GPS.
One of the perks of DriversNote is that it includes odometer readings and automatic calculations. You can easily add and calculate odometer readings, as well as reimbursement and distances.
Plus, your trips and important documents are saved on a cloud so you never have to worry about losing them – even if you lose your phone.
Documentation Feature
The whole point of tracking your mileage using an app is to document your trips automatically. DriversNote gives you an online version of your mileage log, which can be readily downloaded in PDF format. The mileage log is designed to be tailored to the requirements of local tax requirements. And, it also updates the rates as it changes each year.
Pricing
DriversNote offers you 3 different plans to choose from:
The Lite version is free, the basic costs about $12/month and you will have to call them to ask about the Enterprise version.
The basic solution includes an ‘iBeacon.’ This allows you to keep your phone in your pocket still allowing the app to track all your trips. You just need to let it know if the trip is for business or leisure.
DriversNote is a simple and effective way to track your mileage…
But, before you dive into it, it’s best to start off by testing the waters. Start with the Lite or Basic packages to see what works for you and your business.
Feel the Need for Speed?
Do you have experience with DriversNote? Tell us about it in the comments section below.
Keep your records and create a mileage log. It’s best to keep all receipts for your vehicle expenses, as well as a mileage log for all your travels.
Track everything for tax deductions. A good businessperson does everything to trim down their expenses and increase revenue. So, it’s important to track everything for tax deductions.
Separate personal and business use. Any business-related trip can be included in the computation. But your commute (from your home to work and vice versa) cannot be included in the tax deduction.
JP Moses
is a real estate investor in Memphis, TN, with experience ranging from land lording to note buying, rehabbing, and wholesaling. However, wholesaling is the area that he enjoys most and where he bring the most experience and expertise to his students.