Deducting Mileage on Your Taxes

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Deducting Mileage on Your Taxes

The cost of your commutes can quickly add up, from gas to insurance and repairs. But did you know that trips to meet with clients or to pick up supplies are tax deductible? Learn more about these qualifying expenses, and how to save money by deducting mileage on your taxes.

 

What Qualifies as Business Miles

The first thing to do is to understand what business miles meet the criteria for deductions. Amounts fluctuate per year, with the IRS’ 2018 Standard Mileage Rate placing it at 54.5 cents. Your daily drive to work does not typically equate to business miles, except in the following cases:

  • Driving to meet with clients. This includes driving to meals, coffee, and happy hours (don’t forget, 50 percent of the bill is also deductible as entertainment expenses).
  • Business errands, including getting supplies.

  • Trips to temporary office/job site locations, away from your regular place of business (less than one year is considered temporary).

There are different guidelines for the self-employed, but generally, when you leave your place of business, you can start tracking the travel expenses. You should always consult with a tax professional as there are many unique situations and tax laws are always changing.

 

Tracking Your Business Miles

The IRS allows two different methods to track your business miles;

  • Actual Expenses – Add up all of your vehicle expenses, including gas, insurance, registration, and maintenance such as new tires and oil changes. Calculate the percentage at which you use your vehicle for business, and multiply that with the total of your expenses.
  • Standard Mileage – The number of business miles driven in one year. You can keep track with pen and paper or use an app. Or as Intuit’s “Getting the Biggest Tax Deduction” suggests, take a photo of your odometer on New Years Day.

There are pros and cons to each, for example, standard mileage is a more straightforward method that doesn’t require keeping track of receipts. However, you may have a larger deduction with actual expenses if your business vehicle’s engine broke down and underwent repairs.

 

Maintain Records when Deducting Mileage on Your Taxes

There are a few different acceptable ways to keep records when deducting mileage on your taxes. Staying organized, and accurate by using these tools:

  • Business logbook or “pen and paper” – Take note of mileage as soon as possible after each drive. If you wait too long to write it down, the tax courts may deny the accuracy of your records.
  • Bookmark our “Quick Facts” page, to readily reference for mileage rates and other important information about deductibles.

  • Smart apps – Forgo the clutter and join the digital age. There’s an assortment of apps available for iOS and Android smartphones – just make sure to regularly backup your information.

  • Sample method – As Nolo’s “Tracking Business Mileage” advises, consider the sample method. Track a portion of time, perhaps 90 days or even one month, to then approximate the rest of the year. This method is viable if your driving is relatively routine, and doesn’t fluctuate much throughout the year.

Every situation is unique, but use the above guidelines to simplify deducting mileage on your taxes!

 

PHOTO: Flickr/Creative Commons BY-SA 2.0

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