Business Mileage Deduction - Mixed Business and Personal Trips

[Michael in ABQ]

I've got a side hustle reselling items purchased at retail stores and online on Amazon and eBay. I haven't been very diligent about tracking mileage but now that it's becoming profitable I want to make sure I'm taking advantage of this.

A typical situation is that I prepare a package for shipment and on my way to work in the morning I make a detour to drop it off at the post office, FedEx, or UPS store. Can I count any part of this as business mileage? Can I only count the difference between my normal commute and going a bit out of my way to drop off the package?  A similar situation is that I will stop by a retail store on my way to or from work to try and buy new inventory to sell. I purposely try to make these trips involve as little out of the way travel as possible so the difference between my normal commute into work and making one of these stops might be half a mile or actually fewer miles, but slower due to taking surface streets versus the freeway.

This weekend I ran some errands with my kids that included going to a few different stores which I purchased inventory at. The first stop was personal, the second, third, and fourth were business, and the last was personal before heading home. This totaled about 30 miles so do I just make an arbitrary decision that 3/5 of this was business mileage?


Secondly, is a simple spreadsheet listing the date, mileage, and a note about the purpose (sourcing inventory at Walmart, delivering package to post office, etc.) sufficient documentation?

[Hargrove]

Not sure about the first half. I think you can deduct the whole thing if you have a "home office" tax situation, but if you don't, it's commuting the first "stop" and then deductible afterwards.

To the second half, you need the dates, mileage, purposes, and destinations. On the one hand, it's supposed to be contemporaneous (made consistently while you're doing the things), but legal judgements determined that recreating mileage logs was acceptable (it's just a mind-numbing, fabulous waste of time, that may be highly scrutinized).

Remember, the new standard deduction is 12k. The value of itemizing is only (your tax bracket)*(amount over 12k itemized, else 0).

[terran]

Remember, the new standard deduction is 12k. The value of itemizing is only (your tax bracket)*(amount over 12k itemized, else 0).

Business deductions are Schedule C not Schedule A so they aren't effected by itemizing vs the standard deduction.

[Hargrove]

That would be lovely. I will have to look into this again more carefully!

Edit: self-employed (or sole-proprietor) business expenses for schedule C mileage are advantageous that way (I confused those with "business expenses" I take as an employee). Apparently, it's just the other-employed high-mileage folks who are up a creek :p (compared to similar jobs without the mileage).

[terran]

Ah, yes, the OP is talking about a side hustle (AKA a business) for which deductions can be taken regardless of standard vs itemized. Unreimbursed employment expenses are Schedule A.

[Michael in ABQ]

So, any consensus on if mixed personal/business trips are eligible for mileage deduction as a sole proprietor or should I just err on the side of caution and only count specific business trips?

I've got about a 200 mile drive each way to go to my National Guard drill this weekend but there are some discounted items at a store down there I'm considering buying. 400 miles of business deduction would be nice, offset $218 in profit with about $40 worth of gas on a used vehicle that's pretty well depreciated.

[terran]

I would do some googling. There's lots of information out there on the interplay of commute vs business miles, and probably on business vs personal, but I'm not familiar enough with it to answer your questions as I do very little business related driving and when I do it's not mixed. This looks like a good place to start: https://www.mileiq.com/blog/what-the-irs-counts-as-a-business-drive/

[DavidAnnArbor]

That was a good website terran.

I hope you have a  home office, that's crucial for maximizing business mile deductions.

[Michael in ABQ]

No home office, with five kids in a four bedroom house I generally end up working from my laptop in the bedroom or at the dining table.

On the plus side I got my three oldest boys to help me prepare a bunch of items to send in to Amazon, taping boxes and putting a barcode sticker over the UPC. They enjoyed it and I get cheap labor.



Looks like my log needs to be more detailed than I started out with to include odometer readings which means it's basically impossible for me to go back and recreate any past trips.


So if I don't have a home office does that many that each trip starting from home cannot be considered deductible? If I leave from home to the post office to mail a package and then come back home it seems like all of that should be deductible. If I drive from home to the post office, then to my office for my W-2 job is the mileage from home to the post office deductible?

[DavidAnnArbor]

No home office, with five kids in a four bedroom house I generally end up working from my laptop in the bedroom or at the dining table.

On the plus side I got my three oldest boys to help me prepare a bunch of items to send in to Amazon, taping boxes and putting a barcode sticker over the UPC. They enjoyed it and I get cheap labor.



Looks like my log needs to be more detailed than I started out with to include odometer readings which means it's basically impossible for me to go back and recreate any past trips.


So if I don't have a home office does that many that each trip starting from home cannot be considered deductible? If I leave from home to the post office to mail a package and then come back home it seems like all of that should be deductible. If I drive from home to the post office, then to my office for my W-2 job is the mileage from home to the post office deductible?

Do you have a basement?  If so partition a part of it, and call it your home office.

[Michael in ABQ]

No home office, with five kids in a four bedroom house I generally end up working from my laptop in the bedroom or at the dining table.

On the plus side I got my three oldest boys to help me prepare a bunch of items to send in to Amazon, taping boxes and putting a barcode sticker over the UPC. They enjoyed it and I get cheap labor.



Looks like my log needs to be more detailed than I started out with to include odometer readings which means it's basically impossible for me to go back and recreate any past trips.


So if I don't have a home office does that many that each trip starting from home cannot be considered deductible? If I leave from home to the post office to mail a package and then come back home it seems like all of that should be deductible. If I drive from home to the post office, then to my office for my W-2 job is the mileage from home to the post office deductible?

Do you have a basement?  If so partition a part of it, and call it your home office.

Basements are exceedingly rare in New Mexico. We are looking to move soon to a larger house but I still don't expect to be able to have any separate area. Maybe I could setup some portion of the garage as a home office. My side-business involves buying products and then selling them online so I am currently keeping some inventory in the garage. I'll have to look at the rules to see if a "home office/warehouse" counts. Even if it's only 100 SF.

[wbranch]

Inventory storage can qualify. I would look into using the simplified method at $5/sq ft.

https://www.irs.gov/pub/irs-drop/rp-13-13.pdf

.03 Section 280A(c)(2) permits a taxpayer to deduct expenses that are allocable to
space within the dwelling unit used on a regular basis for the storage of inventory or
product samples held for use in the taxpayer’s trade or business of selling products at
retail or wholesale, if the dwelling unit is the sole fixed location of the trade or business.

[Michael in ABQ]

Inventory storage can qualify. I would look into using the simplified method at $5/sq ft.

https://www.irs.gov/pub/irs-drop/rp-13-13.pdf

.03 Section 280A(c)(2) permits a taxpayer to deduct expenses that are allocable to
space within the dwelling unit used on a regular basis for the storage of inventory or
product samples held for use in the taxpayer’s trade or business of selling products at
retail or wholesale, if the dwelling unit is the sole fixed location of the trade or business.

Thanks. I was not aware of this. So even if I'm only using 100 SF of the garage that's $500 a year I can deduct and that should avoid any issues with counting business mileage from home.


Alright, now I just need to start making enough money to justify the overhead costs of actually doing proper accounting so I can use these various tax deductions. 

[brianp]

Out of curiosity, what types of items bought from retail stores do you sell online? This always seemed intriguing to me as the steep clearance discounts stores offer and if you cant sell, just return items.

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[trollwithamustache]

I err on the side of what my mileage log book says.

[Michael in ABQ]

Out of curiosity, what types of items bought from retail stores do you sell online? This always seemed intriguing to me as the steep clearance discounts stores offer and if you cant sell, just return items.

Sent from my LG-M150 using Tapatalk

https://forum.mrmoneymustache.com/entrepreneurship/selling-on-amazon-prime-via-fulfillment-(amazon-fba)-anyone-try-this/?topicseen

Big thread that got me started on this.

So far a few of the more successful items have been some seasonal Yankee Candles that got marked down to $1.70 (MSRP $27.99) that I sold for about $25 shipped as they were no longer available but a few people really liked them. One person ordered three, another one four. That really helped drive down my shipping costs which are relatively high as they're heavy glass candles and need to be well packed. A Walmart about 50 miles away supposedly had about 35 in stock and I kind of wish I had taken the time to drive up there and buy them all. I just bought a bunch of LED light bulbs that got marked down to $4 and are selling for $10-12. Margins are a lot thinner on those and there's a fair amount of competition but I'm hoping to make up for it on volume as I was able to buy a few hundred and if they sell ok the Walmart's around town have about 800 more in stock that are only selling a few per day.

Bought some camera bags that were on sale from a website for $75 with free shipping and sold them for $155.

I've bought some Gillette razors but had to sell some on eBay as Amazon typically doesn't allow third-party sellers due to the high risk of counterfeits. I got around it the first time since someone had made another listing with Gillette misspelled slightly.