If you’re not a tax guru, understanding the mileage deduction can be a bit overwhelming for self-employed workers. There’s a lot of information to unpack, and a list of itemized business expenses to keep track of. Sometimes keeping records is easier said than done, especially if you are a new business owner navigating taxes for the first time.
Among the eligible write-offs, mileage is arguably one of the most important expenses that taxpayers should pay attention to. The mileage deduction allows drivers who use their personal vehicle for business purposes to deduct any car-related expenses if you are self-employed. That goes to say that every business trip is actually tax deductible!
If you’re looking to better understand the mileage deduction, we’re here to answer the most asked questions and detail any limitations you should know about in order to accurately report mileage on your Schedule C form.
There is no limit on the amount of miles you can claim as long as they are strictly designated toward business purposes. For example, a 10 minute drive to meet with a client counts as deductible mileage. Because you are driving for a work-related task, the IRS allows you to log your mileage for the duration of the trip. When you record your business trips each time, you can use the IRS standard mileage rate to calculate your savings each year.
Alternatively, there are instances when mileage does not count. One of the most common misconceptions about the mileage deduction is that commuting is tax deductible. Unfortunately, that is not the case. You cannot claim mileage for your commute to and from work. In fact, even business calls on your way to work are not tax deductible.
As you can see, not every mile counts, but the majority of your business trips can be written off in exchange for big tax savings.
Although there are two methods for claiming car-related expenses (standard mileage deduction or actual expense method), several taxpayers opt for the mileage deduction because it is simple and easy to calculate.
In most cases, the mileage deduction tends to offer the biggest tax savings. If you use your personal vehicle for business purposes, you should be counting your miles daily to qualify for the mileage deduction. You may be wondering, “What qualifies as a business trip?” Below we’ll break down the top examples of IRS-approved mileage:
Generally speaking, using the standard mileage rate is a much simpler way of calculating mileage for your tax return compared to maintaining actual expenses. That said, the option to take the mileage deduction will largely depend on your yearly income and the amount of time you spend in the car.
The IRS does not require qualified taxpayers to submit documentation, however, you will likely be asked to answer a series of questions, including the amount of mileage driven for business purposes, the total miles driven, and even the date, location, and purpose of your business trips.
If taxpayers fail to keep accurate records of business miles, this could lead to rough estimates that don’t seem plausible to your current tax filing. A common tax mistake like this could lead to an IRS audit in which you could be asked to submit documentation of your mileage claims. Yikes!
That being the case, it’s important for self-employed individuals to record all business mileage throughout the tax year. What’s the best way to track mileage? These days, the best method for logging business miles is through automatic mileage tracking. With the MileIQ app, business professionals can easily track every business mile they take and get reimbursed come tax season.
With a thorough understanding of the mileage deduction, it’s easy to see why taxpayers take advantage of automatic mileage tracking. Thanks to the MileIQ app, salespeople, real estate agents, contractors, and freelancers, such as photographers, never have to take time away from their busy schedules to log odometer readings. The app conveniently runs in the background of your phone, accurately tracking every business mile you drive from start to finish.
The best part is MileIQ offers monthly reporting and year-to-date potential savings. If you’re interested in writing-off mileage this year, take a minute to sign up for MileIQ, the #1 trusted mileage solution!