As a small business owner, you already know that every little bit of savings adds up. That’s especially true when it comes to your tax bill.
So it’s important for you to get the most out of the tax deduction by tracking your mileage.
The IRS lets you deduct some of the costs of using a personal vehicle for business purposes. Just like you can deduct the cost of business expenses such as marketing, you can also deduct your business mileage.
Just make sure you’re following the rules or else you may face that dreaded IRS audit.
How Much Is My Mileage Worth?
It could be worth a lot. Every business mile is worth 53.5 cents in 2018. So, if you drive 20,000 business miles this year, your mileage would be worth a $10,700 deduction.
Keep in mind, this is in addition to all your other deductible business expenses. Your miles could go a long way toward lowering your overall taxable income.
Consider how much you truly drive for business. While you can’t deduct your commute, you can write off every trip that’s related to your small business. This includes trips to meet clients, picking up supplies, running to the bank, hopping between offices and much, much more.
Your miles can really add up … If you’re keeping track.
How Do I Record Mileage for the IRS?
The IRS won’t just take your word for how many miles you drove. You’re going to need detailed records of your drives if you want to claim the mileage deduction. This is often called a mileage log.
While you won’t have to submit a detailed mileage log when you claim the deduction, it’s important to have diligent records. That means tracking:
- The mileage for each drive
- The date
- The destination
- The business purpose
How Can I Track My Mileage?
There are multiple ways to track your mileage. Let’s go over the pros and cons of each method.
By far the cheapest way is with a manual mileage log. Just jot down the mileage and business purpose in a paper notebook after every drive. While it’s cheap to do, the downside of this method is that you must remember to record every single drive (including the personal ones).
This may not sound difficult but it’s stunningly easy to forget. You could be running late for a meeting, could be in a bad mood or there could be a great song on the radio as you’re arriving. The last thing most of us are thinking about is logging miles.
You can also keep a record of your drives through a mileage log spreadsheet. It’s pretty cheap to get started and having it on a computer means it’s harder to lose.
The downside is similar to a paper mileage log. You must still remember to manually log your drives. In fact, some people log their drives twice: once in a paper log and then again when they’re in front of a computer.
It may only take a minute to manually log your miles but that’s a minute for every single drive you take during the year. That time adds up.
You can also use a mileage-tracking app. The leading apps provide automatic mileage tracking, so you don’t have to worry about remembering to track drives. These can also calculate the value of drives for you, as well as create records that can stand up to IRS scrutiny.
On the downside, using a mileage-tracking app does require you to own a smartphone. Additionally, completely-free apps may sell your data to third parties. Be sure to choose an app you trust if you go this route.
How Do I Claim My Mileage Deduction?
When tax time comes around, you can easily claim your mileage deduction on the Schedule C tax form under the “Expenses” section. Have the following information when it’s time to claim this write-off:
- Your total car and truck expenses: Find this by multiplying your business miles by the standard mileage rate for the year
- Your business miles for the year, per vehicle
- Your commuting miles for the year, per vehicle
- All other non-commuting, personal miles, per vehicle.
- The beginning and end odometer readings for your vehicle.
- Any business parking and toll expenses (add this amount to your mileage deduction).
Are There Other Car Deductions I Can Take?
Yes, there are plenty. The new tax law has many changes that impact deductions for small businesses, including write-offs related to your car.
You can deduct the actual expenses of your vehicle instead of mileage if you prefer. That involves more record-keeping, but it may result in a larger overall deduction. Keep in mind, you’ll still need to track your mileage for the actual expense method. Work with your tax professional on determining what will get you the largest vehicle-related deduction.
If you drive a personal car for your small business, it makes a lot of sense to start tracking your mileage. You should really stop leaving money on the road.