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Tax Saving Strategy – IRS Mileage Method vs Actual Vehicle Deduction 8/26/2022

We are excited to start a monthly tax saving strategy blog! We took a real estate tax reduction strategy course through Bradford Tax Solutions and are so excited to share what we learned! I have been blessed to have learned throughout the years from an incredibly knowledgeable tax attorney and I still learned some new things this week.

Things we all should know:

Why is it that the one thing that we will spend the most money on throughout our life is not taught in school? Or at all for that matter! I learned this week that 83% of Americans overpay on their taxes! So to whose benefit is it to provide education? Ours! We need to educate ourselves rather than relying on a tax preparer. They used an analogy of solely relying on your dentist to care for your teeth. This is so accurate to what most of us do. We ignore our taxes until it’s time to file and then we panic and try to compensate for our year of negligence. Did you know that there are over 170 standard tax deductions and the average person uses only 23? I am making it my mission to help the people in my circle to learn the simple, overlooked, legal, tax deduction strategies to keep the most possible of their hard earned money.
Most people report overpaying on their taxes due to a lack of knowledge and a fear of being audited. In reality, in 2022, only 0.4% of taxpayers were audited. On average, we are using only 13% of the legal tax deductions! There is nothing to fear if you are using the deductions approved by the IRS. In addition, using a CPA or an EA to confirm your deductions can significantly reduce the odds of an audit and filing an extension allows for your CPA to take more time with you on your return. We will just go over vehicle deductions this week and will cover additional deductions in the coming weeks.

IRS Mileage Method vs Actual Vehicle Deduction:

Most people use the easier route of the IRS mileage method where you multiply your miles driven by the given amount. For the 2nd half of 2022 it was 62.5 cents per mile. They base this on the average fuel expenses of the smallest two door sedan and it is supposed to include all vehicle expenses. With this method, you cannot deduct actual car operating expenses. It is supposed to include all vehicle expenses. This method is hands down easier but most people are losing big by using this strategy. Bradford Tax Solutions calculated the actual expenses of an average sized vehicle to be $1.18, nearly double the IRS allotment. For example, the average Nevada resident drove 14,016 miles in 2022. If 10,000 of those miles were work related then the IRS mileage method would allow for about $6500 in deductions whereas the actual vehicle deduction method would be $11,800, a difference of $5300! Plus you do not need to have a receipt for any vehicle expense less than $75 and you only have to track your mileage for 3 months and you can multiply that amount by 4. Allotted vehicle expenses include: gas and oil, repairs and maintenance, depreciation (1 yr $10,000, 2nd yr $16,000, 3rd yr $9,600 4th yr $5,760), improvements, car repair tools, license and registration fees, parking fees, tires, insurance, car washing, lease payments, towing charges, and auto club dues.
This year there is another phenomenal vehicle tax deduction for the self employed. This is the last year that buying a new or used vehicle over 6,000 GVWR (E.g. Chevy Blazer, Toyota 4Runner) for business is 100% deductible in the first year! That means that you can write-off 100% of the purchase price in 2022. Next year the deduction will be 80%.
In the coming weeks we will go over meals, travel, kids, home office, and medical expenses. Please reach out with any questions and if I can’t answer I will put you in touch with someone who can.

Here’s the numbers from our local market this week:

We had 1 new condo and 1 new home come onto the market this week. We currently have 34 active condos ranging from $377,000 to $3,200,000; the median condo price is $835,000 up $10,000 from last week. We currently have 47 active homes on the East Shore ranging from $1,075,000 to $64,500,000 with the median price of $2,899,999 up 88,000 from last week. Here’s a year to date local update:

Local East Shore Lake Tahoe, Nevada Stats – All Year to Date

Total Sales YTD:
Condos: 66 (↓12% YOY) | Homes: 60 (↓48% YOY)
The Median Sales Price:
Condos: $687,500 (↑3% YOY) | Homes: $1,649,500 (↑3% YOY)
Number of Sales Over $1 Million:
Condos: 14 = 21% (↑8% YOY) | Homes: 51 = 85% (↑6% YOY)
Highest Priced Sale:
Condos: $5,665,500 (↓6% YOY) | Homes: $32,000,000 (↑52% YOY)
Median Price Per Square Foot:
Condos: $594.74 (↑15% YOY) | Homes: $626 (↑2% YOY)
Median Days on the Market:
Condos: 71 (↑27% YOY) | Homes: 76 (↑8% YOY)
List to Sell Price:
Condos: 98% (↓5% YOY) | Homes: 98% (↓3% YOY)
Price Reductions this Week:
Condos: 1 | Homes: 1
If someone you care about needs guidance or recommendations, please share our contact information as we are honored to be able to help! If you would like to receive our in-depth market update or would like an evaluation of your property’s value we would love to hear from you! We’ve put together some information below that we think you’ll find useful. If you have anything you want to share with our community please let us know so that it can be included in future newsletters.
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