5 Frequently Asked Questions About Business Mileage Calculations
Find out how to deduct use of car for business purposes
Whether you have a car that has been purchased by your business, or you are using your personal vehicle for business purposes, you need to know how to calculate mileage for business use of your vehicle.
You can record business mileage in one of two ways - using actual expenses or the standard deduction rate.
To deduct business mileage using the standard mileage rate, multiply the actual business miles driven by the IRS standard mileage rate for the tax year. Note that you can only deduct business mileage, not personal mileage.
Whether you use the standard mileage deduction or actual mileage, you want to select the method that will provide you with the highest tax benefit. The answer to this question depends on several variables, including the number of miles driven and whether you have both personal and business vehicles. The most important variable is the number of miles driven for business during the year.
When you use the actual mileage, you can use almost every expense associated with your business driving, including:
- Interest on the vehicle loan
- Vehicle depreciation (leased vehicles cannot be depreciated)
- Registration fees and tax
- Parking fees and tolls
- Garage rent
- Lease payments (with some restrictions)
- Insurance on the vehicle
- Gasoline and oil
- Maintenance and Repairs
- License plates and registration fees
- Registration fees
Be aware that there are several limitations on use of standard mileage:
Once you have determined your business mileage, you must record it on your tax return. You will need to gather information on the use of your vehicle for business purposes.
The way you record business mileage depends on which business tax return you use. Schedule C for small businesses, for example, includes questions about:
- The date you started using the vehicle
- The total number of miles for business, commuting, and other use.
- Questions about whether the vehicle was available for personal use during non-business hours, was another vehicle available for personal use, and if you have evidence to support your deduction.
Having evidence to support your deduction is the most important part of taking the deduction. If you don't have specific, detailed, at-the-time documents, the deductions may be disallowed at an IRS audit.
Here are answers to questions commonly asked about business travel mileage. Including:
- Commuting miles: Commuting miles are considered personal driving and are not deductible.
- Mileage as advertising. If you drive a car with advertising on it, the expenses for driving the car are not considered as a business expense. (But the cost of putting the logo on the car is an advertising expense.)
- Mileage from a home-based business. If you work from home, miles you drive from home to business locations is deductible as a business expense.
- Deducting mileage for a non-company car. You can deduct business miles driven in any car, as long as you keep good at-the-time records.
Everyone has to drive back and forth to work (unless they work at home). The IRS says these commuting expenses are personal expenses, not business expenses. They aren't deductible on your business tax return or your personal tax return.
There are some exceptions to this IRS rule: You can deduct expenses for traveling between workplaces and between a distant worksite.
if you have a home business, some expenses for driving back and forth from your home business may be deductible, if your home business is your principal place of business. Of course, all of the driving must be business-related in order to be deductible on your business tax return.
This article contains information on the IRS standard mileage rate, updated for the current tax year. The rate is for the year of your tax return, not the year when you prepare the return.
No matter how you calculate your business miles, in order to receive a tax deduction for business driving, you must have excellent records. These records must be complete, accurate, and at-the-time (not months later). Setting up a system for keeping track of business mileage can mean the difference between getting those deductions allowed by a tax audit or not.