Get your biggest tax deduction ever!
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Whether you have a tax-free accountable reimbursement plan, a taxable ministry travel stipend, or no travel reimbursement whatsoever, you need to be tracking your business mileage.
Under a 100% accountable reimbursement plan, your church or denomination reimburses you for all of your “ordinary and necessary” ministry expenses, including business mileage, business meals or coffee with congregants, business materials such as books or software, subscriptions and licenses, memberships, vestments, event and workshop fees, continuing education, etc. This is the best way to get reimbursed. Under a proper plan, this money does not count as income and is not subject to tax (but you can’t claim your reimbursed business mileage as a tax deduction).To get reimbursed for business mileage, you must first track your mileage! Click To Tweet
If you have a travel stipend, your church or denomination gives you an extra “travel” amount in your paycheck. This is supposed to cover your mileage. Many pastors with a travel stipend don’t track their mileage because they’re already getting paid for it. Because a travel stipend is considered taxable income, you should take a tax deduction for your business mileage and reduce the amount of tax you owe on the stipend.
But to receive a tax deduction for business mileage, you must track your mileage!
Likewise, if you aren’t receiving a stipend or a reimbursement, you’re just paying for ministry travel – gas and car maintenance – out of your own pocket. The IRS doesn’t think you should have to pay all of this business expense by yourself, so you can get a tax deduction for your business mileage. W00t!To receive the tax deduction for business mileage, you must track your mileage! Click To Tweet
Is it really worth it?
It depends on how much you drive. But for 2016, the standard mileage rate is 54¢ per mile. (For 2015 taxes, the rate was 57.5¢ per mile, because the cost of gas was higher in 2015.)
If your accountable reimbursement plan pays the IRS standard mileage rate, you’re getting 54¢ for every business mile you drive. Assuming your car only gets 15 miles per gallon, they’d be paying you $8.10 per gallon of gas that you burn as you do your ministry (if you get 20 miles/gallon, 20 x .54=$10.80!). As you can see, that’s more than enough to pay for your gas. If you sock it all away, you could also use that money to pay for regular car maintenance, new tires, and even help save up for your next car when this one is kaput.
If you’re merely submitting your mileage for a tax deduction, calculate it at 54¢ per mile, but realize you have to hit the deductible floor first, so accountable reimbursement is usually the better deal.