Whether zipping between work errands or embarking on a weekend trip to visit family and friends, your odometer remains in a perpetual upward motion. Over time, the combination of your personal and business mileage can put substantial wear-and-tear on your car. To counterbalance the effect of work-related travel, as well as those personal drives, it’s important to track your mileage to earn a future tax write-off.
Because the MileIQ team understands the intricacies of taxes, especially for those who are self-employed or use their personal vehicle for business purposes, it’s important to gain clarity on which mileage is eligible for tax deduction and which is not.
The difference between personal and business mileage lies in the purpose of the trips and the associated tax implications. Personal mileage refers to the miles traveled for non-work-related activities, such as commuting to and from your regular place of work, running errands, visiting friends, or going on personal trips. These miles are not deductible for tax purposes since they are considered individual expenses.
On the other hand, business mileage encompasses miles driven for work-related purposes, such as meetings with clients, traveling to job sites, attending conferences, or making deliveries. Business mileage is tax-deductible, meaning you can claim it as a business expense on your tax return. To qualify for the deduction, you typically need to maintain accurate records, including the date, starting and ending locations, purpose of the trip, and the distance traveled.
Tracking personal and business mileage separately is essential to claim deductions and comply with tax regulations. Using tools like MileIQ can streamline this process, automatically distinguishing between business and personal trips in one swipe. That means, throughout the year you can accurately log all your mileage, free from any worry or stress about making errors.
Overall, keeping a clear distinction between personal and business mileage allows you to optimize your tax benefits and better manage your financial records.
With MileIQ, tracking your business and personal miles is incredibly simple and automated. The app even saves you time by categorizing each trip and generating detailed mileage reports for easy tax deductions and expense management.
Here's how it works:
Download the App: Start by downloading the MileIQ app on your smartphone from the App Store (iOS) or Google Play Store (Android).
Sign up and set up: Create a MileIQ account using your email or preferred sign-in method. Follow the setup instructions to customize your preferences.
Begin automatic tracking: MileIQ uses GPS technology to automatically log your business or personal mileage. Whenever you drive, the app detects the start and end of each trip and logs the distance traveled.
Categorize trips: After your trips are recorded, open the MileIQ app to review and categorize them as business or personal trips. You can add additional details or purposes to each trip if needed.
Frequent drives: Over time, MileIQ learns from your categorizations and can automatically classify similar trips as business or personal, saving you time in the future.
Reporting and exporting: MileIQ generates detailed reports of your mileage, allowing you to have a comprehensive record of your business-related travel and personal trips. You can export these reports for tax purposes or reimbursement. Nevertheless, all that information remains safely stored in the cloud-based system.
Tracking personal mileage can be beneficial, especially if you want to maintain a reliable record of your overall driving habits and expenses. While personal mileage is not tax-deductible, there are several reasons why you might consider tracking it:
While it's not a legal requirement to track personal mileage, doing so can provide you with valuable information and insights into your actual expenses. Whether you choose to manually log your personal mileage or use an automated mileage tracking app like MileIQ, it can be a useful practice for those interested in streamlining their expenses more effectively.
Unlike personal mileage, business miles are subject to verification by the IRS when claiming tax deductions. The IRS expects accurate and reliable records to support your business mileage claims. To verify business mileage, you should keep contemporaneous records that include the date, starting and ending locations, purpose of each trip, and the total miles driven for business purposes.
In some cases, the IRS may request your mileage log as part of an audit to ensure that the claimed deductions are valid and substantiated. In the event of getting audited, having a detailed and well-maintained mileage log will be essential in demonstrating the business nature of each trip claimed for tax purposes. It's important to note that the IRS does not mandate a specific format for the mileage log, however, it is crucial to keep it consistent throughout the year.
As mentioned, using a mileage tracking app will simplify the process, as each mile is automatically recorded and categorized as business mileage, providing reliable documentation to support your tax deductions. By keeping meticulous records of business miles, as well as personal ones too, you can confidently claim the deductions you are entitled to while complying with IRS requirements.