Where to Enter Mileage Allowance Relief on Self Assessment?
Uncover the precise steps to declare your business travel expenses on your Self Assessment. Ensure accurate reporting for tax relief.
Mileage allowance relief allows individuals to reduce their taxable income by offsetting the costs of using a personal vehicle for work-related travel, such as fuel, maintenance, and wear and tear. Eligibility depends on whether an individual is an employee or self-employed, and the specific circumstances of their travel and employer reimbursements.
Understanding Mileage Allowance Relief
Mileage allowance relief covers expenses for business travel, including fuel, maintenance, and depreciation. The Internal Revenue Service (IRS) establishes annual standard mileage rates for calculation. For 2024, the standard business mileage rate is 67 cents per mile.
Employees can claim mileage allowance relief for business travel beyond their regular commute if their employer does not reimburse them or reimburses them at a rate lower than the IRS-approved amount. Self-employed individuals, conversely, can deduct business mileage as an ordinary and necessary business expense against their gross income.
There are two primary methods for calculating this relief: using the IRS standard mileage rates or deducting actual vehicle expenses. The standard mileage rate offers a straightforward calculation by multiplying business miles driven by the published rate. This rate accounts for both fixed and variable costs of vehicle operation. Alternatively, individuals can opt to deduct actual costs, which involves tracking and claiming expenses for business use of the vehicle.
Essential Records and Information
Accurate record-keeping is important for substantiating any mileage allowance relief claim, regardless of employment status or the chosen calculation method. Detailed documentation helps ensure compliance with IRS regulations and supports the figures reported on a tax return. Without proper records, the IRS may disallow claimed deductions.
Individuals must track details for each business journey. This includes the date of the trip, the starting and ending locations, the purpose of the travel, and the total mileage covered for that journey. Maintaining a comprehensive mileage log, whether digital or physical, is a common practice to record these data points.
Beyond individual trips, compile annual totals for business mileage and, if applicable, private mileage, particularly when opting for the actual expenses method. Employees should also record any mileage allowance or reimbursement received from their employer. For those choosing to claim actual expenses, documentation such as fuel receipts, maintenance invoices, insurance premium statements, and records of vehicle purchase or lease are necessary to support the reported expenses.
Claiming as an Employee
For employees, claiming mileage allowance relief is handled through specific IRS forms, depending on their eligibility and the amount of the deduction. Unreimbursed employee expenses, including mileage, are suspended as miscellaneous itemized deductions for tax years 2018 through 2025 due to the Tax Cuts and Jobs Act (TCJA). This means most employees cannot deduct these expenses on their federal tax returns during this period.
However, certain categories of employees remain eligible to deduct unreimbursed expenses. These include Armed Forces reservists, qualified performing artists, fee-basis government officials, and employees with impairment-related work expenses. If eligible, these individuals use Form 2106, Employee Business Expenses, to calculate their deductible amount.
On Form 2106, eligible employees report their vehicle expenses in Part II, “Vehicle Expenses.” They can choose to calculate their deduction using either the standard mileage rate or actual expenses. The calculated deductible amount from Form 2106 is then reported on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, as an “above-the-line” deduction, which means it reduces adjusted gross income regardless of whether they itemize deductions.
Claiming as a Self-Employed Individual
Self-employed individuals claim mileage allowance relief as a business expense on Schedule C (Form 1040), Profit or Loss From Business. This form is used to report income and expenses for a sole proprietorship. Business vehicle expenses are entered directly on this schedule.
On Schedule C, self-employed individuals can choose between the standard mileage rate method or the actual expenses method. If using the standard mileage rate, the total business mileage is multiplied by the applicable IRS rate, and this amount, along with any business parking fees and tolls, is entered on Line 9, “Car and truck expenses,” of Schedule C. This method is often preferred for its simplicity and can be used unless the business operates five or more vehicles simultaneously or has previously used the actual expenses method for a leased vehicle.
Alternatively, self-employed individuals can deduct the actual expenses of operating their vehicle for business. This involves itemizing expenses such as fuel, oil, repairs, insurance, vehicle registration fees, and a portion of depreciation or lease payments. These actual expenses are also reported on Schedule C. Regardless of the method chosen, only the business portion of vehicle use and related expenses can be claimed, necessitating clear separation of business and personal mileage.