BUSINESS MILEAGE DEDUCTION FOR PHOTOGRAPHERS
Time to talk about my favorite tax deduction of all the deductions – and yeah, I’m so deep into this tax scene that I have a favorite deduction. No shame in that. (…some shame…) It’s my favorite for a reason though. Let’s unpack the business mileage deduction for photographers and videographers.
We drive all the time for this job. Your drive to the wedding venue, to the coffee shop for a client meeting, to the office, to the airport, to the paint ball supply store for those dope smoke bombs – all of it affects you and your taxes as a self-employed creative.
You’ve probably heard someone tell you at some point in your self-employed life, “Keep track of your miles!” …but what the heck does that even mean? Why is that important?
The IRS (the federal agency that handle taxes) publishes a standard mileage rate each year. This rate is the amount of money you’re able to deduct per-mile. If you need a refresher on what a deduction is, check out an earlier post here. Some years the rate stays the same, other times it changes wildly. The IRS determines the rate by weighing a variety of factors, but most importantly, the price of gasoline. When the cost of driving increases, so does the mileage rate. Or at least it should.
HOW DO WE USE THIS RATE?
Let’s say you drive 150 miles to and from a wedding venue to shoot a wedding. You know you drove 150 miles because you either…
1. Reset your trip odometer when you left and read it when you returned.
2. You forgot to do that and later mapped it out on Google.
I used to be a number #2 but over the last year got really good about being a #1. Yay self-improvement.
We take that 150 miles and then multiply it by the mileage rate, which as of this writing, clocks in at 53.5 cents per mile.
The $80.25 that just spilled out of that equation is the amount you get to deduct on your tax return.
WHY THE MILEAGE RATE DEDUCTION IS MY FAVORITE
Like I mentioned at the start, this is my favorite deduction for a reason. Why? Because it’s the only deduction where I actually make money without spending it. And for you it’s probably the same…
I drive a Mini Countryman, which gets roughly 32mpg. Driving 150 miles costs me about $20, but as you saw above, my deduction is $80.25. Check it…
YOU HAVE OPTIONS
The IRS lets you choose between one of two methods. We’ll call the method I just talked about above the “simple method,” and the one I’m about to unpack we’ll call the “actual method.”
The simple method is simple. You add up all the business miles you drove for the year and multiply them by the mileage rate to calculate your deduction. If you’re using software like TurboTax to do your tax return, there will be a spot to drop the total number of miles into and the computer will do all the calculation for you.
“So if the simple method is so simple, why would I want to do anything more complicated?”
Good question. In some cases, you might get a bigger deduction using the actual method. With the actual method, you can deduct things like new tires, oil changes, gas, bridge tolls, parking fees (not parking tickets or fines though…), maintenance, repairs, insurance, DMV registration, etc., all on a pro-rata basis. To calculate this actual method, you need to divide the total amount of business miles by the total miles you drove overall.
Example time. Let’s say in 2016 you drove 4,000 miles for business but 5,000 miles overall. So 4,000 miles were for shoots and work-related trips, and 1,000 miles were personal trips, like grocery runs or trips to your parent’s house. We start by dividing the business miles by the total miles:
That means 80% of the miles we drove in 2016 were business-related. Now let’s say you spent $600 on new tires. You can multiply the $600 by that 80% we calculated above and arrive at a deduction of $480.
Can you see how in some instances, using this actual method might result in a bigger deduction? If you spent a lot on your car, this might be the one to go with. The IRS lets you choose whichever method benefits you the most. And again, if you’re using tax software, it will usually pick the best one for you automatically.
WHY TO KEEP TRACK OF MILES
Keeping track of miles isn’t the easiest for some of the less-organized among us. And that’s totally OK! There are many methods to suit your personality.
First things first. On January 1st, make it a New Year’s tradition to walk out to the car and write down the miles on the odometer. That gives you a starting point. And then make a New Year’s Eve tradition on December 31st and walk out to the car to write down the same thing. That’ll be your end point for the year. Subtract the two and ta-da! You figured out your total miles driven for the year.
That’s the easy part. The hardest part is keeping track of all the business trips in between. Here’s some help:
This is the method I use. I make a simple spreadsheet with three columns: date, miles, and a memo. (If you have more than one car, you should have a separate spreadsheet or section for each car.) Before I run a business errand or head off to a shoot, I reset the trip odometer on my car. It’s the little itty-bitty button near the odometer. The key here is to be regular and consistent with your entries. The IRS audits this all the time. Since there’s really no concrete way for the IRS to prove that you didn’t drive what you claimed, the best they can do is review how thorough your record-keeping is. THE MEMO LINE IS EVERYTHING. Write a good memo. Something like “Wedding in Big Sur for Luke & Emily” is fine.
There are tons of apps to help you keep track of miles. Last year when I taught about this topic at Field Trip, I asked some of the folks there what they used. A lot of people mentioned MileBug, so check that out. I’m sure there are several others too. What’s nice about these – so I hear – is that they track trips automatically so you don’t have to fuss with resetting your odometer. Worth a shot. Just make sure it’s accurate.
I tried this method the first year I started off as a wedding photographer. I’m really good about calendaring and have anything photo- or business-related color-coded orange in iCal. At the end of the year, I sorted by “orange” and one-by-one went through and dropped the addresses into Google Maps to figure out how far I drove. As you can imagine, it was a real PITA. I don’t recommend it. For starters, I missed out on capturing miles for errands like a drive to the PO box. For me that’s seven miles, and over the course of a year, probably adds up to about 600 miles. That’s a $300 deduction I missed out on because of lazy. Don’t be lazy. You’re better than that.
WHAT COUNTS AS BUSINESS MILES?
I’m writing to the wedding photographer or videographer among you, but if you’re reading this and do something else, these examples will be different. Obvious business-related mileage include driving to and from the wedding venue or shoot location – or to and from the airport to fly to the wedding venue or shoot location. Many often-missed trips include anything business-related that is in the pursuit of being profitable. These include driving to and from…
1. Meetings with prospective clients
2. The store to get props for a shoot
3. The PO box if you have one for your business
4. Scouting for a shoot (be careful with this one… a camping trip to Big Sur for “scouting” can be difficult to support)
5. The bank to deposit client checks
6. Photo conferences or camps (i.e. Field Trip, WRKSHP, etc.)
There are many other business-related trips you make other than drive to and from a shoot. This is free money people. Make sure you track it all.
Alright. Hopefully all this rambling helps some of you out this year. As always, feel free to ask questions in the comments section below. Also let me know what else you want to hear about!
Heads up, eyes open.