I'm a contract consultant, with a dedicated primary business location (with it's own phone lines, internet service, computer equipment, entrance and exit etc...), completely separate from the living area of my home. My clients site is not in the same metropolitan area as my home.
Even better, I'm working in one state, and paying taxes in my home state, as local income. That makes it VERY clear, that my clients site is not my "primary work or business location".
Also, I'm technically on a less than 1 year contract, both for my client, and for my parent consulting company (yes, I'm technically a small businessman, contracted to the big consulting company, then further contracted out to the small company).
There is really no legal way the IRS can try to claim that I am a direct employee, or that my primary place of business is my clients site.
So, my 148.4 mile per day round trip isn't a commute; it's travel to and from a clients site, and is therefore tax deductible at the standard IRS mileage rate for 2012 of $0.55 per mile.
On Wednesday, it will have been a month since I started work (4/23 to 5/23), with one day taken off (my birthday, April 27th); and this is what my mileage log summary shows for the past month (today, and tomorrow extrapolated from the previous record):
Report 2012/04/23 - 2012/05/23
| Business | Rate | Vehicle | Miles | Mile Deduction | Expenses | Total |
|---|---|---|---|---|---|---|
| Crispin Enterprises | 0.555 | cadillac sts | 2503.8 | $1,389.62 | $0.00 | $1,389.62 |
| vstrom | 742.0 | $411.83 | $0.00 | $411.83 | ||
| Total: | 3245.9 | $1,801.45 | $0.00 | $1,801.45 | ||
| Grand Total: | 3245.9 | $1,801.45 | $0.00 | $1,801.45 | ||
That's for one month.
For the next seven months it's going to be a bit less (since I'm probably going to be working from home one day a week), at more like $327 a week for the remaining 31 weeks of the year, minus three weeks (between vacation and holidays)... That's a total mileage deduction of just about $11,000. Oh and I can also take a deduction for the portion of my loan interest that covers my business usage.
Of course... I am putting 3000 miles a month on my vehicles; and all the maintenance and depreciation cost that incurs (a full years deduction would come to just about $20,000; and as a small businessman, isn't subject to the 2% limit).
Right now, the depreciation on my STS is something like $3,000 a year base, plus mileage... Call it $6,000 total at current used car pricing. My actual expenses (projecting to a full years mileage and costs) for fuel are something like $6,000. My actual expenses for maintenance are something like $3,000 (two major maintenance periods a year, plus two additional oil changes, plus a set of tires a year, plus incidentals).
So, I'm coming out a bit ahead on the standard mileage rate with the STS; and well ahead when I'm using the bike (which gets about 1.75x the mileage of the car, and has basically zero depreciation from what I paid).
Between that, the rest of my uncompensated and unreimbursed business expenses, and all my other business, and personal deductions (and of course, being unemployed for the first four months of the year, and the big pay cut I took from my previous job); my taxable income (and therefore my tax burden) for 2012 is going to be... low. VERY low.
In fact, so low, I think I will have covered my expected tax burden for the year before fall (between my unemployment, the taxes my wife has paid, and the last months taxes paid from the new gig, I've already covered more than 1/4 of it).
So, at least there's that.
