Wednesday, January 31, 2007

Claiming Pizza Delivery Mileage On Your Taxes

I didn't drive last night but I did finish up my taxes. Now, I am not an accountant nor am I a professional tax advisor. I have, however, made understanding taxes a hobby of mine for years and I feel that I know them pretty well.

Many pizza drivers wonder if they can claim their mileage on their taxes. This post is directed towards them.
The answer to the question is, yes, you can. It goes on Form 2106, Employee Business Expenses, which then becomes an itemized deduction on your 1040 Schedule A Itemized Deductions.

If you want to read what the IRS says, start by reviewing Topic 510, Business Use Of A Car.

What you need to know:
  1. There are 2 methods: Actual expenses or mileage. Unless you are driving a newer car that you are still making high payments on, it is usually better (and almost always simpler) to use the mileage method.
  2. If you claim expenses, you must also claim your reimbursements.
  3. To claim your expenses, you must itemize your deductions on Schedule A. Unless you have a mortgage and pay a bunch of interest, or make large charitable donations, you are better off claiming the standard deduction.
  4. Even if you itemize, your unreimbursed expenses must be at least 2% of your total income.
I personally did claim my mileage this year. I always claim 100% of my tips also, so fear of being audited is not an issue for me.

You fill all this information out on IRS Form 2106.

For example, here is my info for 2006:
Start on page 2
Line 11: Date vehicle placed in service: 1/1/2006
Line 12: Total miles: 23,585
Line 13: Business miles: 10165
Line 14: Pct business use: 43.10%
Lines 15-16: blank
Line 17: Other miles: 13240
Line 18-21: Yes
Line 22: $4523

Since I use the mileage method, not the actual expenses method, I can leave lines 23-38 blank.

Back to page 1
Line 1: Vehicle expense from 22: $4523
Line 2: Parking fees, etc: 0
Line 3: Travel expenses: 0
Line 4: Business expenses: 0 (if you are claiming a cell phone, flashlights, maps, etc this is the spot).
Line 5: Meals and entertainment: 0
Line 6: Total Expenses: $4523

Line 7: Reimbursements: $2241 (this is your nightly per-run money)
Line 8: 4523 - 2241 = $2282
Line 9: $2282
Line 10: $2282

Now this total $2282 goes to line 20 on Schedule A, Job Expenses.

So since I itemize anyways, this extra deduction of $2282 for me saved me a few hundred dollars in taxes. I keep a delivery log anyways and I just write down my starting & ending mileage each night.

Again, since I use the mileage method, I do not have to track my car repairs, gasoline costs, etc.

Note once again that I am NOT an accountant, but I am confident that this information is accurate. However, I am not giving any advice here, just letting you know what I did. Study this and compare it to your own situation, and review the IRS publications, and decide for yourself.

9 comments:

Brandon said...

Pretty smart... Great research!

eprocent said...

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Brodie said...

thanks so much.
this is super helpful

Barrett said...

Hello. I am a CPA in Maryland, who just began delivering pizzas during the off season. I concur with the information you gave here. This is correct.

As you are doing, I recommend reporting 100% of tips when you decide to start taking advantage of the tax code. It's a bad idea to only take the good, and purposefully hide the bad. And keep records. My biggest complaint about clients is that they estimate everything. During an audit, the IRS will be more likely to adjust an estimate. If it's written down, in a log, there isn't much they can do.

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Lucas said...

You should mention at the top that if you always take the standard federal deduction anyways (because you don't own anything to itemize) then claiming your mileage is not necessary and basically a waste of time doing the extra paper work.

BS Follmer Show said...

Ironically, at least at a nation wide chain that offers dine in as well as delivery, I have been told more than once that the IRS allocates a percentage of tips from wait staff and do not for delivery drivers. Not to mention, What are drivers to do when the tips are so bad that the nights worth of tips barely fills your tank half full. Filling your tank like this decreases MPG. I have a car that shows average MPG. I can typically go further when filling my tank vs. a partial fill especially when at a half tank or less. When this happens, you really do have to bear in mind that the cost of gas and maintenance decreases your hourly average greatly. I am sorry, but just because the gas goes up exponentially and the delivery fee reimbursement does not even begin to cover the inflation. Back when gas prices were $2 or less, a $1 per delivery is decent. Now, at gas prices above $4, the reimbursement is $1.08. Based on a govt. average according to the president of the franchise of this nationwide monstrosity. Now, gas doubles, but this is only an .08รง increase. The amount afforded back to the driver from the company OR even with the IRS is not based on a current and true living/operating costs. 10 years ago this applies fairly accurately. By todays standards, not even close.

beccagj said...

so I just started delivering a few months ago (the beginning of October) I have tracked my mileage since then, but I have no idea what my odometer read at the beginning of the year. so when filling out line 12, should I estimate my miles for the first 9 months? and also, why do you not fill out lines 15 and 16...?

LTJ said...

line 15 and 16 are for commuting miles which are not deductible if you are a W2 employee. if you are an independent contractor who gets a 1099 then all miles can be used in the calculation for the deduction. however if you are a 1099 contractor, you have to do a schedule C P&L from business (yes even if you don't officially own a business, 1099 work counts as the same). the mileage deduction on schedule C and 2106 are calculated the same way. also, you can deduct a portion of your cell phone bill if you use it to call customers while on deliveries. I use mine every night. good luck!