How far can I drive for a job before it becomes not worth it?
June 27, 2017 2:36 PM   Subscribe

My freelance career involves a lot of driving from job to job. I'm curious how far I can drive for a job before I start only breaking even or losing money.

Going off the IRS mileage rate but adding extra cents for cushion, I figured it costs me about $.60 per mile (is that the correct figure to use?). So from that, I can calculate a radius of how far I can travel per job, but how does writing my mileage off my taxes or getting reimbursed for mileage affect the calculation? Does that mean I can go farther? Is there anything I'm not considering in my calculations so far?
posted by carlypennylane to Work & Money (11 answers total) 1 user marked this as a favorite
AAA says that on average it costs $.57/mile to operate your vehicle. But obviously different vehicles have different costs, and you could easily be paying a buck a mile.

If you can deduct that cost (and, careful, as a square dance caller I've been warned to not try to deduct my mileage because commuting isn't deductible. I haven't delved deeply, but check on this for your circumstances) then that's pre-tax dollars, which can mean a multiplier: If you pay 10% of in taxes on your income, that $.60 is equivalent to $.54 post-taxes, if you pay 40% that's $.36.

But don't forget to include the value of your own time in this calculation, too.
posted by straw at 2:46 PM on June 27, 2017 [1 favorite]

So, I mean, the IRS mileage rate does not capture your actual costs. It is a very rough approximation as to what it is reasonable to consider a mile of driving costing you.

The good news is that, if you have the right vehicle, you can travel much cheaper, and then still use the IRS mileage rate for the purposes of tax deduction. So, if you have a Prius, a mile of commuting might only cost you $0.04 in gas and ~ $0.10 in depreciation.

So, at that point, you could consider the cost of a mile to be $0.14. Except that you also get to deduct $0.54 per mile driven from your taxes. So, if you're in a 25% tax bracket, you're saving about $0.13 per mile in taxes, making commuting miles essentially free (excepting your time).

On the other hand, you could be driving a fast-depreciating gas guzzler that is in fact costing you $0.80 per mile, at which point the $0.13 rebate on your taxes doesn't seem like such a deal.

As you can see, the actual vehicle you are driving matters quite a lot.
posted by 256 at 2:49 PM on June 27, 2017 [1 favorite]

This is where you get into that distinction between commuting (something you do on your own time and at your own expense, generally) and traveling for work (something done on the clock and at the company's expense, generally). So in addition to the IRS mileage rate as discussed above, you have the question of the value of your time. In some fields there is no problem with billing travel time, and in others you can't get away with doing so -- but in either case, your time has value, and the time you spend driving is not time you are doing billable work for other clients, so it is costing you unless the client is willing to pay your travel time.
posted by Dip Flash at 3:19 PM on June 27, 2017 [2 favorites]

I think it's more about the hourly than it is than the mileage deduction. If you are going to a job for $100 for one hour and it's an hour drive each way, first find the real hourly, which would be $33/hr. Then start adding in the deductions, etc. if you work 2 hours for $100/hr, those numbed change.

Is that job worth going to if you get 23.45/hour?

Figure out your hourly need and take it from there.
posted by Vaike at 3:27 PM on June 27, 2017 [4 favorites]

While the IRS doesn't allow a deduction for commuting, I believe they do allow you to deduct mileage from one job to another if you have multiple jobs --- so if you're driving to work at Job #1 in the morning, there's no deduction; travel directly from Job #1 to Job #2 is deductible; travel back home from Job #2 is not deductible.

No idea if this would be true for freelance work as well as salaried, sorry.
posted by easily confused at 3:40 PM on June 27, 2017

Thanks everyone so far for the answers so far. I have some follow up info/questions:

256: If I can figure out my average MPG, do i just swap that number into the calculations of everything else that goes into mileage? (I drive a 2007 hyundai elantra, but I'd have to take an average to figure out my actual MPG).

Valke: how are you arriving at the "real hourly" of $33/hr? Does that include deducting the mileage?

Does anyone have a "formula" for me to use to check if a job is worth it? Or am I oversimplifying this out of wishful thinking?
posted by carlypennylane at 3:52 PM on June 27, 2017

As others have said, this is mostly about the value of your time. Assuming you don't get to bill for your travel time, you need to decide for yourself what is "worth it."

Apparently most commuters (who are not billing for their commute time) value their commute time at ½ their effective hourly pay, and they'll move closer to/farther from their job if the combination of housing price and value of their time works out to be advantageous.

If you agree with that logic, you can price out the time you spend commuting and decide for yourself whether it's worth it.
posted by adamrice at 3:56 PM on June 27, 2017

I think what you're looking for is your real hourly wage - take taxes into account and calculate it per job. You can use your actual gas spend, and then add in some for wear and tear on the car if you want.
posted by warriorqueen at 4:33 PM on June 27, 2017

Another solution to this is: if you're a freelancer, you can charge your clients for travel time. My standard contract allows up to one hour of travel per day (30 min each way) for any meeting of two hours or more. Any travel time above 30 min each way, or any travel for a meeting of under two hours is billed at my normal hourly rate. I have never had a client object to or question this.

Other than that, I think it really depends on how much you value your client. For good, long term clients I would be much more flexible about this, and the current contract would reflect that.
posted by ananci at 5:21 PM on June 27, 2017

Okay, so you take your number of billable hours, multiplied by your hourly wage. That's how much you're making for the job, obviously. Let's call it X. Then you calculate your gas costs for your actual vehicle to drive to the job and back. Subtract that from X for a new running X total. Estimate the per-mile depreciation and maintenance for your vehicle, multiply it by the number of miles traveled to the job and back. Subtract that from the running X. Now consider your travel deductions, which will be $0.54 per mile multiplied by your marginal taxation rate (not quite, but close enough). ADD that to your running X. This is the amount you are actually expecting to gross for the whole job.

Now take your billable hours and add to that your travel time and other non-billable hours. Call that Y.

Divide X by Y to figure out your real hourly rate and then decide if the job is worthwhile.
posted by 256 at 5:22 PM on June 27, 2017

how are you arriving at the "real hourly" of $33/hr?
The scenario was one hour of driving to the meeting, a one hour meeting for which you get paid $100 and then one hour of driving back. That takes you 3 hours and earns you $100, or $33.33 per hour. It does not include any mileage or taxes. If you need to make $50 per hour, that job would not be worth it for you to take. On the other hand, if it was the same drive for a two hour meeting, making it $200 for four hours of driving and work, then you would be making $50 per hour. This "real hourly" wage is the amount you get paid divided by the number of hours the job takes you, including driving but not including expenses like mileage.
posted by soelo at 8:20 AM on June 28, 2017

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