I don’t mean driving to and from work…that’s considered “commuting”, and it’s not tax-deductible.
I mean, do you drive your car during your workday to meet with clients or run errands? If you do, you’re eligible for tax deductions for wear-and-tear on your car.
If you’re the employee of a company, you probably submit your mileage and receive compensation.
If you work for yourself, mileage reimbursement depends on how you classify your vehicle. If the business owns the car (or truck), the business will pay all fuel and maintenance expenses. Reimbursement isn’t necessary.
But if you own your vehicle personally and use it for business, taking the time to track your business use pays off, literally.
The idea is that because it’s your car, you personally pay for gas and maintenance, even though the car has mixed use. To compensate you for these expenses, you can track expenses (like gas receipts) that are specific to work. This is hard to do, since a single tank of gas is usually more than a business trip, and repairs can’t usually be directly associated with a specific job.
Instead, the IRS will compensate you with a personal tax deduction on your 1040 for each mile driven. The idea is that this per-mile rate covers all your business-associated expenses.
In 2016, the IRS’s Standard Mileage Rate is 53¢ a mile. This rate varies every year, so you should check IRS.gov each year to get the current standards.
In addition to business use, you can also deduct mileage for:
- Moving, 19¢/mi
- Medical procedures, 19¢/mi
- Charitable service (volunteering), 14¢/mi
As you can see, it pays to keep track of where you drive, why, and how far you go!
That’s the kicker…you have to have detailed notes for each business, move, doctor’s appointment, and volunteering opportunity.
A few years ago, this was a royal pain. I suggested to my clients that they keep a small notebook or an extra checkbook register in the glove compartment. At the end of each tax-related drive, write down the date, total miles driven, and the reason for the trip. It took a minute or two to do, but it was worth several dollars a day!
Today, it only takes a matter of seconds. There are several smartphone apps that will do the work for you.
Some are manual logs, just like the little notebook, but at the end of the year you can export a report to Excel to do the math instead of sitting down with a calculator to sum up 280 entries.
Others do the work for you automagically, like the excellent MileIQ*. With MileIQ, not only is there no data entry, but you don’t even have to remember to open the app to press Start and Stop at the beginning and end of the journey. Instead, MileIQ uses Location Services to track your movement. It kicks in to record the trip after you reach a certain speed, so that it won’t record walks or bike rides.
At the end of the day (or week), all you have to do is swipe left for Personal or right for Business. A slow swipe left or right adds the ability to categorize the type of trip into Moving/Medical/Charity/Commute on the personal side, and Customer Visit/Meeting/Errand/Meal/Travel on the business side. You can even personalize these lists.
Additional features allow you to memorize certain locations so they appear with names instead of addresses, and to combine multiple trips into one (so if you stop for coffee on the way to a client it still counts as business).
And, of course, you can export reports so you don’t have to a lick of calculating to send a report to corporate, or at tax time.
Your first 40 trips per month are free. Pay $5.99/mo or $59.99/year for unlimited trips. For me, this pays for itself, since MileIQ saves me at least 300 minutes per year in logging and reporting time, and I charge $120/hr!
There are other apps with similar features. Expensify has a mileage tracker, as does the NASE app. But for ease of use, especially not even having to open the app to start & finish a trip, MileIQ will save you time and frustration.
MileIQ, and other apps like it, have brought mileage tracking into the digital age, saving small businesses and employees the headache of manual tracking…and making you money!
*This is an affiliate link that will give you a 20% discount.