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Solved

Mileage Deduction

Forum|Forum|5 years ago
April 15, 2021
4 replies
40 views

Hi! I recently finished filing. During the mileage deduction part, I drove over 5000 miles for my business in 2020. TurboTax said my deduction was about $3000 yet the taxes owed only went down a couple hundred. Am I missing something here?
Thanks!

Best answer by DMarkM1

Yes, the business mileage is multiplied by the .575 per mile rate to determine the income deduction amount. That deduction amount is subtracted from your taxable income. The lower taxable income means lower taxes based on your tax bracket. So if you are in the 10% tax bracket then you will see a tax reduction of about 10% of the income deduction. For example a $3000 income deduction will result in a $300 tax reduction.

That differs from a tax credit which is a dollar for dollar reduction in the tax due.

Level 15

The amount for business miles is .575 per mile. You do not get a dollar for dollar tax break with Schedule C. Add another $500 in temporary expenses and see how little changes.

Samuel-Welch Author

Level 2

Well if I don’t get a dollar for dollar tax break then can you explain how it works?

Level 15

Yes, the business mileage is multiplied by the .575 per mile rate to determine the income deduction amount. That deduction amount is subtracted from your taxable income. The lower taxable income means lower taxes based on your tax bracket. So if you are in the 10% tax bracket then you will see a tax reduction of about 10% of the income deduction. For example a $3000 income deduction will result in a $300 tax reduction.

That differs from a tax credit which is a dollar for dollar reduction in the tax due.

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