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How to Claim Mileage on Your Tax Returns: Step-by-Step Process

Mileage-based tax deductions play a huge role in the tax returns of millions of taxpayers every year. The deduction directly reduces taxable income, effectively lowering the amount of tax you owe the IRS (or increasing your potential refund). 

If you’re wondering whether you’re eligible or how exactly to claim a mileage deduction on your tax return, you’re in the right place. You’ll learn how to track mileage, which forms to fill, and which records to keep. 

We’ll also help you determine which method for calculating mileage deductions - standard mileage or actual expense is best for you.

Key Takeaways

  • You can choose between the standard mileage rate and the actual expense method for mileage deductions. However, if you choose the standard mileage rate in the first year, you cannot switch to the actual expense method for that specific vehicle in later years.
  • Maintain comprehensive documentation, including mileage logs for the standard method and receipts for actual expenses. It's crucial for calculating and substantiating your deduction and meeting IRS requirements.
  • When claiming your mileage deduction, use Schedule C for business, or Schedule A for medical and charitable, and ensure accuracy by not mixing personal and business mileage. 
  • Keep your mileage records for at least three years in case of an audit.

Table of contents

1. Choose Your Method of Calculation

The IRS offers two methods for mileage deductions: the standard mileage deduction and actual expense. 

The first option (standard mileage) is more straightforward. It requires mileage tracking and then calculating the deduction using standard mileage rates provided by the Internal Revenue Service. 

The actual expense method is more complex. It allows you to claim a deduction on most vehicle-related expenses throughout the year. However, it requires you to keep records of those expenses, in addition to mileage tracking. 

Your overall tax deduction can be significantly impacted by the method you use. Generally, the actual expense method is considered more favorable for those who use their car for business very frequently, while the standard mileage is usually a better solution for less frequent drivers. 

Switching between both methods is possible unless you choose actual expenses as your first method. In that case, you have to stick to your decision for future years.

2. Collect All Relevant Documents

If you’ve chosen the standard mileage method, you only need your mileage logbook or a report from a mileage-tracking app like MileIQ. If you’re using a spreadsheet or a physical notebook, make sure that it has all the required information, including the purpose of each trip, date, and starting and ending point. 

For the actual expenses method, you’ll have to collect all the receipts, invoices, and possibly other documents that confirm the business purpose of a vehicle expense. 

If you track your medical or charitable mileage, you may also have to include the documentation that confirms visits to doctors, pharmacies, or drives to and from a non-profit’s location.

Download MileIQ to start tracking your drives

Automatic, accurate mileage reports.

3. Calculate Your Eligible Deduction

Once you’ve selected your method and have together all the documents, you’re ready to calculate. The calculation process varies based on your chosen method.

Standard Mileage Method

If you picked the standard mileage method and you’ve been using a mileage tracking app, this part will be done automatically. 

If you haven’t, the calculation is still fairly simple. Take the total business miles you recorded for the year and multiply it by the standard mileage rate. While you’re at it, make sure to use the mileage rate for the current year. The IRS usually updates the rates in mid-December. 

Here are the IRS rates for 2024:

  • Business: 67 cents per mile 
  • Charitable: 14 cents per mile
  • Medical and moving (military personnel only): 21 cents per mile

So a simple formula for the calculation of business mileage would be:

business miles driven * 67 cents = your deduction

It’s a very simple way to get a tax deduction for your business travels, but before choosing it, you should consider a few IRS regulations. For example, you can’t use the standard deductions for more than 5 cars at the same time. You can check the full list of rules on the IRS website

Actual Expense Method

Alternatively, if you’ve opted for the actual expense method, the calculation is a little more complex. 

  1. Add up all the vehicle-related expenses (gas, insurance, depreciation, tires, repairs, etc). 
  2. Calculate the business use percentage (ratio of miles driven for business purposes)
  3. Multiply results from steps 1 and 2. 

Here’s a formula:

vehicle-related expenses * business use percentage = your deduction

Now, a quick example to show how it works:

Let’s say that all your eligible expenses sum up to $20,000. That’s your first key number. 

Then, after calculating your business mileage, it turns out that you’ve driven 15,000 miles for business purposes, and your total mileage for the year is 30,000. It results in 50% business use (yes, we like simple calculations, sue us). 

Now, you can use those numbers to calculate your tax deduction. 

$20,000 * 50% = $10,000

4. Fill Out the Form

After determining your eligible deduction, the next step is to complete the relevant tax form. 

As a business owner or self-employed person, you should record your vehicle expenses on Schedule C, Part II, Line 9. You fill in the same line regardless if you’ve chosen actual expense methods or standard mileage.

Additionally, you will need to complete Part IV, where you’ll provide information on your vehicle. This includes:

  • The year you placed your vehicle into use for business purposes
  • The total number of miles you drove
  • How many of those miles were used for business, commuting, or other purposes.

If you’re claiming medical or charitable mileage, the correct lines are on Schedule A (Form 1040), Itemized Deductions:

  • Line 1 for medical mileage
  • Line 12 for charitable mileage

5. Retain Your Records

Maintaining precise records is not only crucial for calculating your deductions but is also an IRS requirement. You should hold on to all the relevant documentation for at least three years in case you need evidence during an audit. This includes mileage logs, receipts, and completed tax forms.

Tip for Maximizing Your Mileage Deductions

Perhaps the best way to maximize your deduction is to record all eligible travel. While it may sound obvious, many drivers tend to omit certain trips or simply forget to track their mileage. 

For example, Jason is an independent contractor, and from time to time, he has to take a trip to a nearby store to grab some materials. 

“It’s just a few miles,” he says. 

But those miles stack pretty quickly. To illustrate the potential impact, consider if Jason had made bi-weekly trips to the store, each trip being 5 miles round-trip. Over a year, this adds up to 260 miles. With the IRS mileage deduction rate at 58.5 cents per mile for 2023, Jason could have claimed an additional $152.10 in deductions.

That’s why by switching your logbook or spreadsheet to a mobile app, you can both make your life easier and save some money. The automation features in these apps eliminate the need to manually stop and record each trip, allowing drivers to save time and ensure no mileage goes untracked. This not only simplifies the tracking process but also maximizes your deductions with minimal effort.

Common Mistakes to Avoid While Claiming Mileage

The most common mistakes you can make on your way are:

  • Including personal mileage in calculations
  • Using rates from previous years
  • Providing insufficient documentation 
  • Including trips that aren’t eligible for deduction (e.g. daily commuting from home to regular workplace)

As you see, knowing the IRS guidelines and having a good system for tracking and reporting can really help you with claiming the correct maximum deduction. Especially because any errors can lead to an IRS audit and potentially costly penalties. 

If you need any more information about the ins and outs of mileage deductions, check our other articles

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