As tax day approaches, it is critical to understand the rules for claiming mileage deductions available to anyone using their vehicle for business purposes. However, it is important to avoid common mistakes that can leave money on the table or, worse yet, make yourself a candidate for being audited by the IRS.
Common mistakes to avoid
- Failing to keep detailed records or logs of mileage
When claiming mileage deductions from the IRS, the number-one mistake is not recording all appropriate business drives. While not recording one or two a week may not sound too impactful, forgetting drives over the course of a year can have a significant influence on the amount of IRS deductions you claim.
- Confusing personal and business trips
When logging your miles driven for work, it is imperative that you only report business-related drives. Make sure you are logging all appropriate drives by understanding which types of business drives can be claimed as deductions to the IRS.
- Not being familiar with the IRS Standard Mileage Rate
The IRS mileage rate for business expenses and the self-employed for 2023 is 65.5 cents/mile. According to the IRS, this rate is based on “an annual study of the fixed and variable costs of operating an automobile.” Make sure you use the correct annual rate and stay familiar with all of the IRS’s rules and regulations to correctly calculate your deductions.
- Failing to document the business purpose of trips
This common mistake ties in with our point above: claiming mileage without a clear business purpose is a red flag for the IRS. When claiming business drives you want to have deducted from your taxes, you need to have copies of the records of these drives. Including these records in your tax reporting is critical to reduce the chances of an audit.
- Neglecting to keep receipts for tolls and parking (which are deductible!)
Don’t forget to include parking fees and tolls – those can add up fast. The average cost of monthly parking in Birmingham, AL is $87.93 per month. The prices can also be high for toll roads; there are over 719 miles of toll roads in Florida alone. Keeping track of toll roads and parking fees is key when citing deductions to the IRS.
Tips for avoiding these mistakes
- Log all of your miles digitally with detailed records of drives
The easiest way to keep track of your miles is to log all your drives with a tracking app like MileIQ. That way, you never miss a business drive that can be counted for a deduction. Using the MileIQ app is easy; all you have to do is download it, set up your profile, and keep it running while driving to log all your miles and not miss a single deductible drive.
- Keep personal and business trips separate with some digital help
Use MileIQ to review these trips and correctly categorize each drive when convenient for you. In the MileIQ app, you can label places you frequent to categorize drives. Doing so will make it easy when it comes time to get your taxes in order, with MileIQ generating validated mileage reports.
- Record receipts for tolls and parking
Use MileIQ to record your drives on toll roads and the associated costs. Afterward, the app will add them to your driving report automatically.
This method also works with parking receipts. To record a parking fee in the app, simply note the parking spot you were charged at, insert the fee amount, and MileIQ will add this to your custom spreadsheet.
MileIQ is your tool for keeping accurate records for the IRS
Using MileIQ to automatically ensure accurate deductions are ready for tax season is the key to preventing these common mistakes. MileIQ negates the pain points that lead to these critical mistakes by tracking all of your drives and providing you with audit-ready reports.
It's crucial to follow IRS guidelines closely and maintain accurate and comprehensive records to avoid these pitfalls and ensure proper deduction claims. Before you begin getting your tax materials together, ensure you understand the IRS rules for claiming mileage, and consult a tax professional if you need clarification on any IRS standards. Understanding what business expenses are fully deductible will aid your tax preparation, and being aware of the IRS mileage rates is critical. Be sure to follow these steps to claim deductible miles with the IRS.
