Tax season comes just once a year, but it takes significant organization each month to prepare. For self-employed individuals, in particular, the process of gathering documentation and maintaining accurate reports is especially important. If you plan to take the mileage deduction, home office deduction, or other eligible tax write-off, you’ll need substantial proof to back your claims. 

In this guide, we will focus our attention to the mileage deduction, explaining the step-by-step process of claiming mileage on taxes.

5 steps to claiming mileage from the IRS

Step #1: Choose a method

When it comes to claiming car-related expenses, the IRS gives taxpayers two options for calculating potential tax savings: the standard mileage rate or actual expense method. 

The standard mileage rate involves tracking your mileage for business purposes throughout the tax year. You can maintain records manually, or use an automatic mileage tracking app to document your drives. When it’s time to file your taxes, you simply multiple the total number of business miles driven by the IRS standard mileage rate. The IRS rates for 2024 are:‍

• 67 cents per business mile (up 1.5 cents from 2023). 
• 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces (1 cent less from 2023).
• 14 cents per mile driven in service of charitable organizations (unchanged from 2023).
• Employers can also set their own mileage rate; however, the figure should not exceed the IRS standard mileage rate.

The actual expense method is another way to claim the use of an automobile for business purposes, but it requires eligible taxpayers to track the total money spent on the business use of their vehicle. If you choose this method, you must deduct operating costs, including depreciation, licensing, insurance, gas, repairs and maintenance.

• You can only deduct the business-use of your vehicle. That means, you must compute the percentage of time you use your car for work-related purposes. 
• For example, if it costs you $4,000 to operate your vehicle in a given year, and you used your car 60% of the time for business purposes, then you could deduct $2,400 on your tax return. ($4,000 vehicle costs x 60% business use)

Step #2: Gather documentation

It’s fair to mention this is one of the most important steps in claiming mileage from the IRS. Not only do accurate records keep your tax information well-organized, it also helps you avoid any IRS audits down the road. 

With the standard mileage rate, it’s imperative to maintain a logbook of all your business drives. One of the easiest ways of doing this is by signing up for an automatic mileage tracking app. Every time you drive to a job site or run a business errand, the app will run in the background of your phone and create accurate logs of your mileage. 

Alternatively, in the chance it is more beneficial to deduct actual expenses, you’ll need to keep receipts, digital invoices, and any documentation that backs your deduction claims. To illustrate, if you have a repair done on your vehicle, you must keep the receipt for your future tax filing. 

Step #3: Time to calculate

Although there are pros and cons to each calculation method, it typically depends on your annual income to understand which option is best. In general, the standard mileage rate may produce larger savings one year, while the actual expense method could offer a larger deduction the next. For these reasons, our tax experts often recommend that self-employed individuals and business owners roughly calculate and compare both methods before proceeding forward. 

‍Important tip: Business owners must use the standard mileage rate in the first year of using their vehicle for business purposes in order to alternate between methods in the years following. 

‍How to calculate: 

Standard mileage rate: multiply total business miles by the IRS standard mileage rate for the year.

Actual expenses: multiply your total car expenses by the percentage used for business.

Step #4: Fill out your Schedule C form

Now that you have the basics figured out, it’s time to file! For those who are new to filing taxes on a Schedule C form, we recommend seeking assistance from a licensed tax professional. This person will walk you through the process of filing as a self-employed individual and help you avoid any tax mistakes that could put a damper on your deduction. 

If you use a tax preparation software instead, you will need to add your vehicle-related costs to the Schedule C, Part II, Line 9 section yourself. It goes without saying you must reference your records to accurately fill out the requested information. 

Step #5: Hold on to your records

The good news is — the hard part is over! You officially filed as a self-employed taxpayer. However, don’t be quick to throw away those important documents. The IRS has up to three years to request an audit. That means, you will need to hold on to all your tax paperwork for a minimum of three years or more. 

We hope you enjoyed our guide to claiming mileage from the IRS! Whether you have help from a tax professional or take on the job yourself, it’s important to know what to expect throughout the entire process. Since vehicle expenses account for the majority of eligible write-offs, we encourage all real estate agents, contractors, HVAC technicians, sales professionals and other business owners to start logging mileage today! 

Visit the MileIQ website to learn more about automatic mileage tracking and the different plans available.