As a Shopify seller, managing your business expenses effectively is key to maintaining profitability and paving the way for financial freedom. One often-overlooked area where you can save significantly is through mileage deductions. With the 2025 IRS mileage rates now available, it’s time to understand how these can work for your business.
Proverbs 27:23 reminds us, "Know well the condition of your flocks, and give attention to your herds." This verse underscores the importance of diligent stewardship in all areas of our work. By tracking and optimizing your mileage deductions, you not only practice good financial management but also honor the resources entrusted to you.
2025 Standard Mileage Rates
The IRS has set the following standard mileage rates for 2025:
Business use: $0.70/mile
Charitable use: $0.14/mile
Medical/moving: $0.21/mile
For Shopify sellers who regularly use their vehicles for business purposes, the $0.70 per mile rate can quickly add up to significant savings. For instance, if you drive 10,000 miles for business in 2025, your deduction would be $7,000.
Understanding Depreciation and Basis Reduction
When using the standard mileage rate, a portion is allocated to vehicle depreciation. For 2025, this amount is $0.33 per mile. This figure is important for tracking your vehicle’s adjusted basis, especially if you plan to sell or trade it in the future.
Example: If you drive 20,000 business miles in 2025, your depreciation totals $6,600 (20,000 miles x $0.33).
Employer-Provided Vehicle Valuation
For employers offering vehicles to their team, the 2025 rules allow you to use fleet-average or cents-per-mile valuation methods for cars with a fair market value (FMV) up to $61,200. These methods simplify reporting and ensure compliance with IRS regulations.
Example: If an employee drives 12,000 personal miles in a company-provided vehicle using the $0.70/mile rate, the reportable income is $8,400.
Practical Tips for Accurate Mileage Tracking
To maximize your deductions and ensure compliance with IRS guidelines, consider these tips:
Use a mileage tracking app: Digital tools can make real-time logging accurate and hassle-free.
Document trips immediately: Note the purpose of each trip to avoid misclassification.
Separate personal and business use: Ensure that personal miles are excluded from business expense calculations.
Example: If you drive 15,000 miles in a year and 60% are for business, you can deduct 9,000 miles, equating to $6,300 at the 2025 rate.
Common Mistakes to Avoid
Avoiding errors is just as crucial as diligent tracking. Common mistakes include:
Failing to document trips: Without proper logs, you may lose out on valuable deductions.
Misclassifying trips: Personal errands cannot be claimed as business expenses.
Ignoring basis adjustments: Not accounting for depreciation can lead to tax inaccuracies.
Example: A missing log for 5,000 business miles could mean a lost deduction of $3,500.
Conclusion
By staying informed and taking proactive steps to track your mileage, you can make the most of the IRS’s 2025 mileage rates. Proverbs 27:23 encourages us to steward our resources wisely, and this principle applies to the way we manage business expenses. Careful record-keeping and leveraging deductions not only save money but also contribute to long-term financial stability.
If you have any questions or need personalized help, don’t hesitate to reach out. Schedule a call with Jacob by going to https://www.jacobcurtiscpa.com/7-shopify-mistakes-calendar. We're here to help you piece together financial freedom.
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