What Is a Mileage Log, and How Does It Affect Your Taxes?
A mileage log is an essential tool for any driver who intends to get a tax deduction or employee reimbursement based on their car usage. Its role is to keep travel records for tax purposes. Mileage logs are mostly used by businesses and self-employed drivers, but you may also need one to get a tax deduction for medical, charitable, or moving-related travel.
In addition to setting yearly mileage rates, the Internal Revenue Service (IRS) provides clear instructions on tracking mileage and what information has to be included in the mileage log to get a tax deduction.
To keep track of your mileage, you can use an actual logbook or take advantage of a dedicated app to make things much easier. While the first option might be viable if you don’t travel a lot, the second one is highly recommended as it helps keep crucial data in order, including trip purpose, dates, and actual mileage.
So, if you want to stay on point with the IRS regulations and ensure you receive a fair tax deduction, learn how to run a perfect mileage log.
What Is a Mileage Log book?
A mileage log-book is a record you keep for tracking distances traveled for work purposes. A logbook can help you deduct expenses from your tax payments, whether you are self-employed, or own a small business.
There are four types of travel that qualify for a tax deduction and require mileage tracking. For each category, the IRS provides standard mileage rates that define how much you can deduct on your tax return:
- business (67 cents per mile in 2024)
- charitable (14 cents per mile in 2024)
- medical (21 cents per mile in 2024)
- moving but only in the case of military personnel (21 cents per mile in 2024)
As a taxpayer, you can use those mileage rates to reduce your taxable income as long as you meet certain conditions and have qualifying travel. But most importantly, you need to track and record your mileage. And that’s why you need a mileage logbook.
What to Record in Your Mileage Logbook?
The IRS specifies what additional details must be included in your mileage log. If you want to get your full tax deduction, your log must have:
- The date and purpose of each trip
- Total miles driven
- Odometer reading at the start of each trip
- Starting location
- Ending location
The IRS even provides a mileage log template that may help you to ensure all necessary information is recorded, keeping you compliant and ready for tax time. However, it’s fair to say that the pen-and-paper method may be inconvenient and prone to error.
With mileage-tracking apps like MileIQ, you can simplify and automate the entire process, ensuring that all required information will be recorded. These apps work like digital logbooks and can be exported into IRS-compliant formats, making tax filing a breeze.
Recordkeeping is also much easier with software-based solutions. In the case of an audit, the IRS can ask for proof of mileage from the past three3 years., Keeping all your mileage data in a secured cloud is much easier than maintaining a filing cabinet stuffed with papers.
Impact of Mileage Logs on Taxes
Mileage tracking can save you quite a lot on your tax return, especially if you drive a lot of miles for qualifying purposes.
Consider this scenario: If you drive 10,000 business miles in a year, and the IRS standard mileage rate for 2024 is 67 cents, you could deduct $6,700 from your taxable income. And if all that’s necessary to get that deduction is accurately tracking your mileage throughout the year, you must agree that it’s a pretty good deal.
Audits and Mileage Logs
The most common reasons for an IRS audit regarding mileage are:
- missing data or documentation
- calculation errors
- incorrect mileage rate applied
- unusual patterns or changes
- mileage much higher than the average
- prior audit history
As you see, a mileage log can be a critical piece of evidence in the case of an IRS audit. If you’re audited, the IRS may ask for detailed information about each trip. And if you run a business, they will ask for mileage data about all the employees who received reimbursements. That’s why recording and reporting all business trips accurately is so important.
Should I Track Personal Mileage ?
Tracking personal mileage isn’t mandatory for tax purposes, but it still may be helpful for a busy car owner like yourself. By understanding your driving habits, you can better assess the expenses related to personal trips. Maybe it will lead you to change how you transport and explore other methods like biking or public transportation.
More importantly, though, maintaining a separate record of personal mileage can prevent the inaccurate claiming of personal miles as business deductions, which can result in audit and tax penalties.
What Are Mileage Deductions?
The role of mileage deductions is to allow businesses and individuals to reduce their taxable income by subtracting the costs of using personal vehicles. Besides work-related usage, mileage tax deductions are allowed for medical, moving, and charity-related travel.
The IRS establishes a standard mileage rate per mile annually. For example, in 2024 the standard business mileage rate is $0.67 per mile.
In addition to businesses and self-employed people, a mileage tax deduction can also be claimed by individual taxpayers for:
- medically-motivated travel
- travel for charity-related reasons
- moving-related travel (but only in the case of military personnel)
Each type of travel has specific regulations set by the IRS.
What Are IRS Requirements for Mileage Deduction?
The IRS has set specific guidelines for each category of eligible travel, but the three are basic rules for all mileage tracking:
- Use the correct standard mileage rates for the current year
- Record and properly categorize your mileage throughout the year
- Calculate your deduction, fill out your tax return, and keep records for at least 3 years.
In addition to that, each category has its own much more specific regulations regarding what exactly qualifies as deductible mileage and in what situations you qualify for a deduction as a taxpayer.
For example:
- Daily commutes from home to work don’t qualify as a business trip.
- Medical expenses, including mileage, can be deductible only if their total exceeds 7.5% of your adjusted gross income.
- Moving mileage deduction can be claimed only by active duty military members, following The Tax Cuts and Jobs Act.
It’s also worth noting that IRS regulations regarding mileage deductions are revised yearly and, in special circumstances, even twice a year. Any errors or miscalculations may lead to IRS audits and potential penalties.
How to Calculate Deductions from Mileage?
The formula for standard calculating mileage for tax deductions is quite simple. You need just two numbers to figure out what to write on your tax return:
- Number of eligible miles driven: You should be able to find this number in your mileage log or tracking app. If you track more than one category (business, medical, charitable, moving), you need to do separate calculations.
- The standard mileage rate for the year.
After you have your numbers, use this formula:
Number of eligible miles driven * mileage rate = tax deduction
In mileage rate, put $0.67 for business, $0.21 for medical or moving, and $0.14 for charitable (rates for 2024).
Actual Expenses Method for Tax Deductions
There’s an alternative for standard mileage deduction, which can be more appealing to those who use their vehicles very frequently. By choosing the actual expenses method, you need to maintain comprehensive records and receipts for all vehicle-related deductible expenses such as:
- fuel
- repairs
- insurance
- parking fees
- tires
- washes
- and more
It takes much more recordkeeping over the year but may help you get significantly higher deductions.
The choice between the standard mileage rate and the actual expense method depends on your situation. Generally speaking, if you use your car very frequently for work-related purposes, you should consider choosing the actual expense method.
Still tracking miles by hand?
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