There are many facts & myths about the mileage deduction. We've included a few mistakes people have made while using mileage log books below.
Mileage Log Requirements from the IRS
Some of the common errors you see in a vehicle mileage log are:
- Not including the business purpose
- Using estimates instead of proper documentation
- Errors from either negligence or just mistakes.
Remember, you don't need to record your odometer reading with each trip, but you do need proper documentation. Here are some mistakes that recently hit the Tax Court:
Vehicle Mileage Log Mistakes To Avoid
Jim Chapin, a California real estate broker, used his Toyota Sequoia SUV for his real estate business. He figured he drove a total of 11,135 miles for business one recent year. He deducted $5,309 for car expenses. The IRS audited him and disallowed the entire deduction. Not only that, it also added a 20 percent negligence penalty.
Jim appealed to the Tax Court and lost. Jim did not keep a detailed log of his drives each day, week, or month. He didn't have a mileage tracker automatically creating records. He instead created a handwritten log when he learned the IRS was auditing him.
Jim also had an itemized list for the costs of fuel, insurance, parts and more. Yet, these lists didn't include the business purpose for the trips, nor reported the mileage traveled or the amount of each trip expense. The Tax Court found these records weren't enough and denied his entire $5,309 deduction. (Chapin v. Comm'r, T.C. Summ. Op. 2014-31.)
Mileage Log Book Mistake #2: Not Keeping The Right Info
David Garza did a better job than Jim of creating his mileage log. He kept records in a calendar planner book. He'd record his truck's odometer readings at the start and end of each month. Some other months would including more readings and some wouldn't. It wasn't as consistent as a mileage tracker app that logged all of his miles.
The calendar planner also had some personal notes but didn't include other vehicle expense info. David did not record any of his personal travel in the calendar.
David claimed that he drove over 40,000 miles for business in 2010. The large amount of mileage resulted in a $20,085 deduction. The IRS and Tax Court denied his entire deduction.
His calendar was not a reliable substantiation for his claimed mileage expenses. The Tax Court said this mileage log needed the time, business purpose or other costs. (Garza v. Comm'r., T.C. Memo. 2014-121.)
Details Matter In Your Mileage Logs for Taxes
Even a mileage logbook that on its face looks pretty good may not pass IRS muster. A good case in point is Mr. and Mrs. Moore, who operated a real estate brokerage business in Texas. They each kept a mileage logbook consisting of 12 pages, one page for each month of the year.
Each page contained entries for each day of the month, including odometer readings, miles driven (sometimes designated as "commuting" and sometimes as "business"), and the purpose for the trips. The Moore's each typically drove over 100 miles per day for their business and claimed a total $31,840 mileage deduction for the year in question.
Unfortunately, the IRS and Tax Court denied their deduction. The Court said that the logbooks were not reliable because they contained too many errors and questionable entries. For example, they did not include the name of a single person the Moores claimed to have visited for their business. Instead, the business purpose of their driving was stated in general terms, such as "OPEN-Review Task Log-Close Office", "OPEN-Review Contract-Close," or "Open-Update Website-Close." (Moore v. Comm'r, TC Summ. Op. 2012-16.)
