How Do I Keep Track of Business Miles the Easy Way
A simple log book or phone app is all you need
Some business owners and employees who must travel in the course of their jobs keep excellent records of business mileage. For the rest of us, it's a huge chore. But if you don't keep these records the right way, you can't include the expense on your business taxes and you could miss out on a large tax deduction.
Worse, you might take the deduction anyway and get audited. The IRS will ask you to prove your miles with documentation. You can't deduct what you can't prove so you must capture the information to take the deduction.
The Right Way to Keep Business Mileage Records
The IRS wants "timely and accurate" records. It expects you to keep a "daily log showing miles traveled, destination, and business purpose." The easiest way to do this is to stick to an "at-the-time" log. Write it down as you go.
Keep a small log book in your car and write down four pieces of information every time you drive for business purposes: the date, why you're traveling, your point of origin, and your destination.
Include your client's name or that of another business purpose such as your bank or your CPA. Write down the point at which you began driving there. Include the address or some information about your destination.
You can record the actual mileage if you want, or you can add this in later from a map program on the Internet. The important thing is to record where you started and where you ended up.
It's a good idea to include any expenses such as gasoline and parking and the amount if you'll be deducting your actual auto expenses rather than claiming the standard IRS mileage deduction.
Separate Your Business Miles
Of course, if you're permanently connected to your smartphone, numerous apps are available that will record your mileage for you. They'll even separate your business miles from your personal miles. If you use the same vehicle for both business and personal use, you must also record your overall mileage at the beginning and end of the year.
This allows you to calculate a business-use percentage. If you logged in 24,000 miles overall and your mileage logs tell you that you drove 6,000 of them for business purposes, your business-use percentage is 25 percent.
Reporting Your Mileage
The next step is to include this information on Schedule C of your business tax return. The two methods of reporting mileage are "actual" and "standard". There are advantages and drawbacks to each, and there are also some restrictions on reporting actual mileage.
If you use your actual auto expenses, you can take a deduction for 25 percent of them in the scenario where you drove 6,000 out of 24,000 miles for business. Otherwise, you would simply multiply those 6,000 miles by the standard IRS mileage rate—54.5 cents per mile as of 2018.
The Bottom Line
Start keeping track of your expenses for business use of your car, even if you don't think there will be many business trips. Getting into the habit in January is better than losing out next April.