Any comments on the following tip would be welcome, esp. regarding the issue of how to account for longer than normal jobsite commutes. Thanks, Joe P.
Driving May Cost More Than You Think
At tax time, the IRS allows you a 36 cents-per-mile deduction for jobsite-related driving expenses. But that’s not the number you should be using when estimating your actual driving costs for jobs where there’s a significant commute and you’ve decided to include them as a direct job cost. Your real costs are probably going to be much higher — 51.7 cents on average according to a 2003 study done by the AAA. The study was based on a composite national average of three variously-sized 2003 models (Chevrolet Cavalier LS, Ford Taurus SEL Deluxe and Mercury Grand Marquis LS) and a 4-years/60,000-mile ownership period. It also looked at a vehicle that’s popular with many contractors, the 2003 Chevy Trail-Blazer. The latter would cost even more — a whopping 56.1 cents per mile, according to the AAA. Estimates of builders who use the IRS-allowed number will be off by about 50 percent. That may add up to hundreds and perhaps even thousands of dollars of lost profit every year.
Replies
And I'd bet that those articles were written when the price of gas was about 1.19.
I try hard to keep my jobs close to home. One of the ways I do that is to include, in some estimates or other pre-contract conversations, an honest discussion of how I handle driving time and mileage.
(Note that if the potential job is distant, but I want the job, I'll still include the numbers, but not all that verbiage.)
I explain to the potential customer that I charge for drive time just as if it were working time, and in addition, I add on for the miles.
Best I can tell, if I do anything less than that, I'll be losing money.
I have to keep my jobs close to home because every tool I forget is there instead of at the jobsite where I need it.
I'm affraid if I were to approach a mileage issue I would get laughed off of the customers property. Charging portal to portal for a plumber is bad enough.
I would just add a little more to your overhead and profit and not mention mileage at all.
Here's an idea, next time you fill up take the total $35.00 add 40% $14.00= $49.00 for your new hourly labor rate.
Now when a cutomer asks you for a discount you can tell them as soon "as you get a discount on your Gas you will pass the discount on to them"..........:-)"Rather be a hammer than a nail"
Bob
I'm affraid if I were to approach a mileage issue I would get laughed off of the customers property. Charging portal to portal for a plumber is bad enough.
And in general, I think that I would too. And that is why I sometimes mention to the customer that my overall proce must include time and expenses for driving -- so that they will think twice about hiring me.
You see, there are some jobs that I try really hard to get, and there are some jobs that I truly don't want. But instead of telling the customer to go take a hike, I let them pass on my price.
Vast projects should not be founded on half vast ideas.
My tool van costed about .51/mile back when gas was about a buck
Excellence is its own reward!
"At tax time, the IRS allows you a 36 cents-per-mile deduction for jobsite-related driving expenses. "
Let me see if I get this right: if you're a contractor, you get to deduct 36 cents for every mile you commute? Unless I'm missing something, I don't see what there is to complain about.
"Let me see if I get this right: if you're a contractor, you get to deduct 36 cents for every mile you commute? Unless I'm missing something, I don't see what there is to complain about. "
No you can't.
You don't get a penny in deduction for communting. Only business travel.
So if your office is your house, then every time you drive to a jobsite or even a potential job, you can deduct .36 for every mile from your taxes? That's a pretty good deal, and I don't want to take it away from you guys, but I'm ignorant and don't see how if you drive 40 miles to a job, pound nails for 8 hours then drive 40 miles home, you get to deduct $28.80 from your taxes that day, but if I commute the same miles in a day to get to the office, I don't get anything. Is this true or am I missing something?
don't think you are missing anything
but this deduction applies to any business.
believe also if you have an office outside the house, you have to drive there and from there go to the job to deduct millage. go directly to job, no deduction.
really need to talk to tax expert, but don't ask the IRS, they are not responsible for their answers (soverign immunity, gov't not responsible for wrong answers of their employees, something like that)bobl Volo Non Voleo
Well that's a pretty good deal, and reasonable IMO since contractors are actually driving all of their stuff around. I hope all of them know enough to use this credit because it is so expensive to be working out of your vehicle these days.
Thanks.
volo,
Really? You have to drive to the office first? So if I'm in a different business, take consulting, and I'm flying to New Orleans to consult, I would have to stop at my office first? I don't thinks so.
Joe,
i was talking about local commuting, and as I remember it, which is from home to work is commute, not business travel. work to work is business travel
I also said need to talk to a tax expert, these things change.
edit: believe it is irs pub 463
bobl Volo Non Voleo
Edited 9/11/2003 9:01:27 AM ET by bobl
When I started this business my CPA (my brother) told me to track all expenses. I work from home( ie my home is my office) and I travel from there to the jobsites. All travel expenses are deductable on the business taxes. Including but not limited to the auto expenses. Remember also that if you office in you home a portion of your house payment, electric bill and telephone bills (unless you have a seperate line for the business) is deductable as well. But you must have receipts.
think one of the key things in your post is your office is in your home, so you are leaving from work.
it is oh so important to talk to your tax guy. took a quick look at irs pub 463 and it can be confusing.
there are two pieces here, the business owner and the employee. can have different effects. in one case it is deductible in the other not deductable.
one of the examples i remeber was a consultent without an office at home, going to first client of the day was his/her commute. going from 1st to 2nd client was a business commute.bobl Volo Non Voleo
And there is more to it than "just having an office in the home".
You need to go through all of the pubs and in some cases through the different rulings to see what is applicable.
But I think that what is applicable is "place of principle business".
And that can vary a lot depending on the details.
For example a roofer that does many new construction for a set of GC so he does little in the way of desigen, estimating, selling, etc. He might spend 2 hours a week in his office doing paper work. That would probably not be his principle place of business so his first trip of the day would be commuting.
Now take a remodeling contract that says has 2 employees that do basic demo and framing and he subs everything else out. Also he does all of the design work, sales, etc, etc. He might be working in his home office 4 hours aday doing designs, doing estimates, scheduling subs, etc.
In that case his HO is the principle place of work and any (business) trips past the refigerator would be deductible.
Several times I have gone in the off season to a CPA for an our or two of consulation about questions like this.
It is true but I think you are missing some things. First- operating costs. If you run a large truck or van, your tire, fuel, and maintainance costs are considerably higher than the family truckster, not to mention more wear and tear. The insurance for a vehicle used for commercial use can easily be double that of your vehicle. 36 cents a mile won't cover it. Consider the big picture, too. If you are self employed, you are essentially employer and employee. Things that you working for someone else might take for granted- health insurance, workmans comp, having half your Social Security tax paid by your employer, paid time off, all have to be carried by the self employed person. Lots of money of $ paid out before you (hopefully) get to put some in your own pocket.
thought just struck me
know a number who posted are self employed, single people companies
but for folks with employees, what do you do for them?bobl Volo Non Voleo
I'm an employee and my boss was going to buy me a truck but decided he couldn't afford it at the time. Instead he pays all my vehicle expenses. Insurance, gas, repair, maintenance, registration, but not tickets.Smile. It could be worse. You could be me working for you.
Very good explanation, thanks. I forgot about the awful insurance difference between a work truck and a commuting truck.
That's the way it works. Because it is a business, and the business requires the workers to travel to the jobsite, and the jobsite will be different for every job or contract. If you are an office type worker, you have the option of living near your place of employment, because it doesn't change day to day.
By the same token, the company you work for is allowed to deduct the cost of heating and/or airconditioning your place of employment. What a deal! You get to work in a climate controlled environment, AND YOUR EMPLOYER GETS TO DEDUCT THE COST. WOW.
Even with the high gas prices, insurance, oil changes, and even figuring in my monthly payments I still come out below .36 per mile. What else do you all add to your auto expenses to come out so much higher? It wouldnt even be close without the monthly note, which I would have to pay even if I worked for someone else. Gas only costs me .12 per mile, insurance about 120 per month. I change oil myself for about 10 bucks, and I drive a new truck so most other things would be covered under warranty. What am I missing?
I can think of a few things, wear and tear on tires, how many miles you get out of them/ cost of new set of tires = x a mile, same for breaks, etc, any other wear items I would think should go into that cost. Cost of other fluid changes anti-freeze, tranny, trans axle, etc all have some cost per mile how ever small Plus any deprecation on the vehicle.
But I'm not an accountant, so... take it for what it is worth.Never be afraid to try something new. Remember, amateurs built the ark, Professionals built the Titanic.
Yea i guess tires and brakes would add a couple hundred a year. Im sure there are little things here and there that add up and I know that doing my own maintenance work saves me money too. I still figure .36 per mile is pretty close to my actual cost though. Maybe Ive just been lucky and havent had many unexpected expenses.
There's leasing costs or depreciation (depending on whether you own or lease); insurance; gas; tires, brakes, maintenance; annual registration, etc. In short, everything you spend to put the truck on the road. They are all costs of having that vehicle for your work.
Cairo,
I think this is the key. I'm think AAA must include depreciation when coming up with the .56 cent figure. The specify that the vehicle is new and that the costing is based on 60000 miles and 4 years of ownership.
Joe P.
First of all your monthly payment is NOT A DEDUCTIBLE EXPENSE.
However, you interest is.
Also the DEPERECIATION.
And all maintance expenses.
You really need to visit with a tax pro or at least get the related IRS pubs.
There is on one small business taxes and another specially on business deductions if I remember correctly.
http://www.irs.gov
Bill, I believe you misunderstand my point. I take the standard mileage deduction. It covers all of my truck expenses as far as I can tell. That does include the loan payment. There is no depreciation if it covers the entire cost of the vehicle. I understand that the loan payments, with the exception of interest, are not deductable. It still works out that they are deducted in my case because my operating costs seem to be well below the standard deduction. My point is that the original poster claimed that the standard deduction of .36 per mile seemed like a good deal, and i agree. Many seemed to think that operating costs were much higher but didnt support it with any facts. I keep every receipt for every purchase I make whether business or personal so I am pretty confident with my figures. After reading one of the other posts I realize where some of the difference is. They are useing a very small amount of miles traveled.
Yes, I did missread it. I thought that you where deducting the payments are actual cost.
Actually you don't deduct $28.80 from your taxes, you deduct it from your net income. Deduction from your taxes would be more like $9.60, depending on your tax bracket.
Then either you're not self-employed or, if you are, you don't have a clue. (And Bob Walker is a decent man...whether one agrees with him or not!)
leaving the "commuting" terminology aside, the complaint is that if you are allowed a .36 deduction when it costs .51, you are losing money. I take actual costs though.
To you guys afraid of theidea of charging, in a cost plus contract, that is often one of the listed costs, especially for hauling in equipment or trips to the dump, gophering etc. even on a local job in close. I remember once that I moved 270 miles across Colorado and four months later got a call that I was the only roofer a guy back yonder wanted to do his roof for him, and was willing to pay the transportation and the perdiem to get me back up there. His offer, not mine.
I had a local customer here buy a place in Boston and he wanted to paymy freight to go down there and super a job on his Beacon Hill place.
I took the first job, refused the second
So, I can imagine somebody seeing one of Bob's great looking deck designs when he visits from away abd offering to pay extra for transportation to get a "pro-dek" quality job.
Another scenario involves specialty contractors such as those in commercial work who do a cerain phase of item all over the country for franchises. Like the guy who sets up the golden arches for McDs or the booth installer for all the pizza huts or the deep fry guy who installs at all the Kripsy Kreme dog nut shops around the country. Those guys travel a lot. I was once offered a position on the road doing service followup on mobile homes. They offered choice of company truck or provide my own and voucher for miles.
Another part of this figuring is that when I look at out of the way jobs, I have always weighed whether it was cheaper to run the route every day and work fewer hours on the job or to figure in the perdiem costs to stay local while doing the job. That comnparison is an education in itself..
Excellence is its own reward!
I don't tell the customer anything. When calculating my estimates, I just include travel time as a line item and include that time in the total price.
We have several overhead door companies who charge $40 for each "trip charge". Ditto for appliance service companies. It not, they would be losing money.
As the saying goes: "Time is money."
you get to deduct 36 cents for every mile you commute
No, you don't. You get to deduct it for every mile OF BUSINESS TRAVEL. Which isn't the same thing at all. Commuting refers to travel from home to your office; if you're self employed, business travel refers to the travelling from home or office to the jobsite. Typically, if you only used a company vehicle to drive from home to the office, you would not be allowed to deduct the mileage.
And of course the actual out of pocket costs to run a vehicle are going to be a lot higher than what you can deduct.
in what's deductable i would check the IRS wording carefully.
leaving from "home" to the job i believe is commute therefore not deductable. maybe if you have a "home office" it would be allowed
been a while since i looked at that.bobl Volo Non Voleo
Dosen't any one else keep track of expenses instead? I started 3 years ago after reading about it. I figure I average about a $500.00 higheer deduction every year. This year it has to be higher.
I know that in the sale type world, if you leave from home and go directly to a customer site, that is considered business travel, although it can be a gray area.
Good point Volo, but I think it would be unfair to builders if they didn't get the deduction. A salesman, who travels to visit his clients and who is rarely in his office, gets to deduct the travel. Why not a builder? I bet that a surgeon who has to travel any distance to a hospital to perform his thing would take the deduction, too.
Cairo,
The original post was about jobsite-related driving, so it's deductible. And as Piffin notes, you have the option of deducting actual costs if you choose. So if you keep records and amortize the truck, you can take the whole deduction. Or so it seems to me.
Joe P.
Why not just have a company card and have the company pay for your gas. Add it to your overhead and charge accordingly. I tried that keeping track of miles crap. Problem is the company has to reimburse you for the money that you spend. At .36 per mile would it not be cheaper and easier to just have a company card and charge it to your monthly overhead?
What about highly dense urban areas, such as the heart of a city where parking is a problem etc.
Charge the customers for parking and any other inconvenience?
I know when my folks were getting estimates for painters in the heart of Boston, a number wouldn't work down there because of parking, and the ones that did wanted a premium for parking etc.
I thought that was fair, only one idea I didn't "like" was the guy that wanted the customer to pay for parking tickets.
What premiums to you do charge for high traffic, low parking areas?
Never be afraid to try something new. Remember, amateurs built the ark, Professionals built the Titanic.
I worked in Boston for a while. My boss would pay for parking tickets. You can eat up $15 or $25 pretty quickly driving around looking for a place to park on Beacon Hill.
I've heard of a couple of those Boston jobs where they just include in the estimate a hundred a day for parking fines and towings or one where they included time for one guy on crew to just keep circling the block with the truck all day..
Excellence is its own reward!
With where my folks got their new place I can understand and up-charge, My mom needed a little convincing, but came around pretty quick.
I'd be hard to convinced though to charge a client for parking tickets on the back end, up front sure, add it in, I can see the client looking at it as being taken advantage if you come to them at the end with several tickets, I can also see contractors being ir-responsible and not worrying about getting tickets.Never be afraid to try something new. Remember, amateurs built the ark, Professionals built the Titanic.
I don't know if I'd call it ir-responsible. It's just a act of life that there is no parking available. Garages are something like sixty bucks a day but that can be a mile from the job.
Were I in the area and a potential client asked me to come intown and do some work for him, my first response would be, "I don't think that I can do it because I don't have a parking place in there." He would reply, "Just add the cost to the job and come take care of me."
It's not much different from here, where there is almost no labor force on island because of land cost. So the cost of the ferry is part of the package to get people over here.
.
Excellence is its own reward!
Edited 9/12/2003 12:46:14 AM ET by piffin
I've never lived in that urban of an environment, so I can't really say, but I can see some of the less reputable people in the industry, not looking for a parking space perse if they didn't have to pay for tickets.
I defiantly think that in regard to parking and expected expenses it's right to pass the buck to the client, personally though I couldn't make them pay for my tickets. I'd either scope the area for a parking garage/lot, see if they could provide me a spot, or plan in a ticket or so a day in the original cost as to not have to come to them later Never be afraid to try something new. Remember, amateurs built the ark, Professionals built the Titanic.
Right
;)
The line item wouldn't read, "parking tickets"
It would just read, "parking costs"
you're getting it..
Excellence is its own reward!
I recently got a 50$ ticket for parking with my wheels on the sidewalk while I was unloading materials for a job. It was still better to pay it than hump all the materials down the street from the nearest parking spot. Thats one job I should have had delivered, but it was too small and I figured id be finished before the parking guys got me. It is important to figure parking and easy access into the cost of some jobs.
You urban living people sure put up with a lot! Here the cops would never come near if someone was unloading materials on the sidewalk - they'd be afraid that they'd be expected to help! ; )Any jackass can kick down a barn, but it takes a carpenter to build one.
Here they have what are called "Parking Diplomats" that write tickets in the downtown area. The city just gets a cut of the fines. Its the same company that owns the parking lots so they have a real incentive to keep people from illegally parking. Its probably a good thing they were gone before I got back to the truck. Wasnt much in the mood for polite conversation.
around here....white work vans usually get one or two passes....
I must confess to driving the van when I coulda just drove the car...when I knew parking would be limited and I'd just be "running in for a minute".....
Like I've said to the wife before....
"don't worry ..... they think we're working here!"
Was great fun when we "toured" the new development under construction that was closed to public access but was all over the news......had a nice relaxing drive thru the neighborhood......saw the sights ...then out past security.
The all time best was dropping her off at the new rental car place at the airport.....before 9/11 .......could see the building ...but we couldn't find that damn new road for the live of us......circled about 3 times ..each time passing the "restricted contractors access" temp road that looked to lead right where we had to be....
Time was getting short so I said to hell with it ...I'm a contractor!
Road took us right where she had to be......although to their back door .....I went out the way I came...and she went out the right way after they showed her the real road.....
All I need now is a flashing yellow strobe!
Never wait in line again.....
JeffBuck Construction Pittsburgh,PA
Fine Carpentery.....While U Waite
That used to work here too, until they privatized the parking ticket company. They even started giving cops tickets at the courthouse. Gave UPS drivers tickets, it got out of hand. They had to back off some and their contract was only for a year so I imagine it will be better when the cops take over again. I made deliverys to a shipyard when I was in school, a big yard where they built navy destroyers and ships like that. One day I picked up a guy that was walking to lunch and gave him a ride. He asked if I had ever been on the ships and I said no but I would like to. He said just take this hard hat and act like you know what you are doing and you can go anywhere you want. I tried it and noone ever even asked what I was doing. Probably cant do that anymore either.
Yeah.... ..the good old days.....
my Dad used to work for the railroad.....used to get some prime parking for some prime fishing spots long the tracks......just pull across ...drive down .....and park anywhere along the rivers.
Leave the old man's hardhat on the dash and the railroad cops would leave ya be for days on end.
Now I'd probably get arrested for false papers and attempted terrorist activities.
JeffBuck Construction Pittsburgh,PA
Fine Carpentery.....While U Waite
Gee, 50 cents sounds like a dream. I did the math on my rig last year, and diesel prices have gone up if anything. If I include the cost of the vehicle, fuel, insurance, and regular oil changes as the cost of owning it, I'm just over a buck a mile for the forseeable life of the vehicle. Never mind the headaches of the periodic things that go wrong. A few weeks ago my tranny committed suicide. Ouch.
"The child is grown / The dream is gone / And I have become / Comfortably numb " lyrics by Roger Waters