Maximizing Your Business Mileage Deduction

When you’re in charge of a business, you’re responsible for all the costs that come with it. Luckily, the IRS allows you to deduct some of those expenses, such as using your car for business purposes. If driving is a crucial aspect of your business, it’s vital to understand how to keep track of your mileage to make the most of this deduction.

What Business Miles are Deductible?

According to the IRS, miles driven for the purpose of growing or operating your business may be deductible. Some examples of business trips that qualify for a deduction include:

Traveling to a client meeting

Going to an office supply store

Running business-related errands, like going to the bank

It’s important to note that you can’t deduct all miles driven for your business. The IRS does not allow the deduction of mileage or expenses related to your regular commute.

Options for Deducting Miles

When it comes to deducting miles, you have a couple of options, including the actual vehicle expenses deduction and the standard mileage deduction. Let’s take a closer look at each one.

Actual Vehicle Expenses Deduction

Actual vehicle expenses are the costs associated with using your car for business purposes, such as registration, insurance, gas, oil, maintenance and repairs, depreciation, interest on a car loan, and lease payments. To determine the amount you can deduct, you need to calculate the percentage of miles driven for business versus personal use.

Standard Mileage Deduction

The standard mileage deduction allows you to deduct business-related miles driven based on the rate set by the IRS annually. To qualify for this deduction, you must meet specific criteria, such as owning or leasing the vehicle, using fewer than five cars for business, and using the straight-line depreciation method for your vehicles.

If you qualify for both deductions, it’s essential to calculate both options and choose the one that gives you the most significant tax benefit.

Tracking Your Miles With a Log

It’s crucial to keep all your tax-related documents in order, as you could be audited by the IRS at any time. To substantiate your standard mileage deduction claim, you may need to show an auditor your mileage log. Here are some key steps to help you track your mileage:

Decide How To Log Your Miles

Whether you prefer electronic methods or pen and paper, choose a system that works best for you to log your miles consistently.

Set Up Your Log

Preparation is key. Create a log with the necessary columns, such as date, destination, reason for traveling, beginning and ending odometer readings, total miles driven, and expenses.

Remember To Fill Out Your Log

Consistency is essential. Make sure to update your mileage log every time you drive for business to stay organized and ready for tax season.

Use an App

If you prefer a digital solution, consider using a mileage tracking app. These apps can automate the tracking process, calculate your deductions, and keep accurate records for IRS compliance.

Conclusion

Tracking your business mileage can help you maximize your tax deductions and keep your finances in order. By understanding the IRS guidelines and utilizing tools like mileage logs or tracking apps, you can ensure you’re making the most of your business-related driving expenses.