How to Track Mileage for Taxes

Using your personal vehicle for work can cause the miles on your vehicle to quickly stack up. More mileage means more repairs, more gas and more frequent car maintenance, like oil changes. While you may need to pay for your vehicle’s maintenance out of your own pocket, you also have the ability to earn some of that money back through minimizing how much you owe in taxes. It’s important to understand how to track mileage for taxes so you’re keeping as much money in your pocket as you can.

There are a few different ways to track miles for your business, ranging from defining what counts as business miles to using suggested mileage tracking apps. Here are some of the best ways to track mileage for taxes.

1. Understand ‘Ordinary and Necessary’ Business Expenses

Mileage is considered an “ordinary and necessary” business expense according to IRS Publication 535, which explains common expenses, what’s deductible and what’s not. 

Put simply, the IRS explains, “The costs of operating a car, truck, or other vehicle in your business are deductible.” The standard mileage rate for 2020 is 57.5 cents per mile.

If your car is used exclusively for business, you can deduct all of your car expenses. However, if you use your car for both business and personal purposes, “you must divide your expenses based on actual mileage.”

2. Choose the Standard Mileage or Actual Expenses Method

In figuring out the costs or miles put on your car for business use come tax time, you can use either the Standard Mileage method or Actual Expenses method. Standard Mileage is a simpler method in which you calculate the number of miles, while the Actual Expenses method requires you to carefully remove deductions associated with your actual self-employed work.

Make it habit to know the mileage of your car from the start of the year. That’s right, you should head out to the garage to check the odometer on New Year’s Day. This is a method of deducting the number of miles you’ve put on your personal vehicle using the Standard Mileage method and often asked for by tax filing software.

3. Keep a Mileage Log for Taxes

Every trip you take on behalf of your business — ranging from heading to the fabric store for supplies to attending a crucial business conference — should be added to an electronic mileage log for taxes (and preferably kept on a cloud source for backup purposes). 

Create a Google Sheet or save an Excel worksheet or something similar to Dropbox. Be sure to track mileage from your trip, the date and the reason (i.e., restaurant opening, picking up supplies).

4. Use a Tax App

Many tax apps are designed with business owners in mind, and especially if they’re tracking mileage for business. While there are a number of good tax apps out there, a couple tax and non-tax apps alike keep track of mileage, including Shoeboxed and Expensify. You can also just cut straight to mileage tracking with apps like MileIQ and Hurdlr.

Get the Right Coverage

Keep your business protected by making sure you are properly covered. Talk to your Farm Bureau agent about the right auto insurance coverage for your mileage and use. 

Neither the Company nor its agents give tax, accounting or legal advice. Consult your professional adviser in these areas.