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My employer does not reimburse me for mileage but rather gives

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me an allowance of 250.00...
My employer does not reimburse me for mileage but rather gives me an allowance of 250.00 per month which is taxed. I am driving around 1500 miles a month to various retaurants he owns. I am spending around 700.00 per month on gas and its killing me. He claims its 100% deductable on my taxes but what is that going to equal as far as money saved on my end. I make 43k a year including the allowance and I get around 8k a year in bonuses.
Submitted: 6 years ago.Category: Tax
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Answered in 4 minutes by:
8/1/2011
Tax Professional: Lev, Tax Advisor replied 6 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi and welcome to Just Answer!
Your employee business expenses are deductible.

LEV :

You need to itemize your deduction in order to take advantage.
You may choose either to deduct actual transportation expenses or deduct based on mileage.

LEV :

In your situation it might better to deduct based on mileage.

JACUSTOMER-dzwu8yay- :

i realize that I want to know if im basically saving the equal amount of money from being deducted in taxes at the end of the year. example i pay 8400.00 for gas and mileage throughout the year. does that mean i paid 8400.00 less in taxes?

LEV :

By deducting your expences - you reduce your taxable income.

LEV :

That is not a credit that goes against your tax liability.

JACUSTOMER-dzwu8yay- :

ohh okay so I make 43k a year so it reduces my agi by 8k

LEV :

I may estimate your deduction if needed.

JACUSTOMER-dzwu8yay- :

if thats possible I really just want to take this information to the table for re-negotating with him I cant afford this through the year

JACUSTOMER-dzwu8yay- :

i used the tax witholding calculator online but it dosnt show a big saving however I wasnt adjusting it from my agi

LEV :

If you are an employee (with compensation reported on W2) - deduction of employee business expenses will not affect you AGI - it will be reported on schedule A as miscellaneous itemized deduction.

LEV :

If you drive 1500 miles per month for business - total $18,000 per year - you may deduct 51 cents per mile - total - $9180.

LEV :

You need to add to this amount other items - such as charitable contributions, state income taxes, property and real estate taxes, mortgage interest, etc.

LEV :

Your actual deduction of employee business expenses is a subject of 2% AGI limit - thus - you will deduct $9180 - ($43,000*2%) = $8320.

LEV :

Assuming you are single, no dependents, standard deduction, $43,000 in wages - your estimated tax liability - $4230
If you go itemize - you will deduct employee business expenses $8320 plus some other deductible expenses - see above - assuming total $12,000. In this case your tax liability would be $3280.

LEV :

Let me know if you need any clarification.

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Lev
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