All About Mileage

The mileage deduction is a tax write-off used to offset the cost incurred through using a personal vehicle for business purposes.  If you are a business owner using a personal vehicle or an employee driving your own car or truck for work, you should be tracking your mileage.

Is it Business Mileage?

The IRS only allows a deduction for miles that are driven for business.  This does not include your commute between your home and your regular place of business.  Applicable miles include:

  • Mileage driven between your place of employment and a second work site/location or to meet clients off-site
  • Work related errands such as driving to the post office, bank, or to the office supply store
  • Do you drive to meet clients or vendors for dinner or a quick coffee? Miles driven for business meal or entertainment purposes are deductible
  • Miles driven to and from the airport for a business trip
  • Do you have a side-gig such as babysitting, dog walking, or lawn care? Miles driven to the location of an odd job should be tracked for deduction
  • Miles driven to a temporary job site (if it lasts less than 1 year)
  • Mileage related to job seeking (there are limitations)

Be sure to track and document your actual mileage driven for business purposes.  Claiming a round number, such as 15,000, on your return is more likely to create red flag with the IRS.  Should you ever be audited, you will be expected to produce a log of your mileage for the year.

Reimbursement vs. Tax Write-off           

It is important to note that if your employer reimburses you for the miles you drive your own car then you cannot deduct the mileage on your taxes.  Business owners, you may choose to reimburse yourself at the Standard Mileage Rate through your business or claim the miles as a deduction.  Alternately, you may choose to deduct actual vehicle expenses in lieu of mileage.  A few examples of vehicle expenses you can deduct are:

  • Gas and oil
  • Parking or toll costs for business trips
  • Lease payments
  • Car insurance
  • Repairs and maintenance
  • Depreciation of the vehicle and any improvements
  • License fees

If you choose to deduct the Standard Mileage Rate, there are still a few vehicle expenses that are deductible:

  • Any interest you pay on a car loan
  • Personal property tax paid on the car (ad valorem)
  • Parking or toll costs for business trips

Regardless of the category you fall into, be sure you are accurately tracking the miles in a mileage log or documenting car-related expenses and keeping a record of receipts.

Log Requirements

The IRS has minimum requirements for mileage logs.  To be compliant, your log must include at least the following for any miles driven for business purposes:

  • Actual mileage
  • Date of the drive
  • Places driven
  • Purpose of the trip

Restrictions

To avoid any headaches down the road with the IRS, it is important to know what restrictions exist.  Most importantly, you should note that should you choose to use the actual expense method the first year that you use a car for business purposes, you must continue using that method until the car is sold or no longer used for business purposes.  If you use the Standard Mileage Rate the first year a car is in service, then you may switch back and forth between the two methods in the following years.  However, it is important to note that switching back and forth may result in the need to recapture depreciation.  Consult your CPA or tax professional for additional information.

2018 Mileage Rates (valid 01/01/2018 through 12/31/2018)

It isn’t exclusively business mileage that is tax deductible.  If you commute for medical purposes, such as regular visits to a doctor or medical facility, or for charity or volunteer purposes, be sure to track that mileage as well.  The mileage rates are considerably lower than business miles, but are still considered deductible.

  • Miles driven for business purposes: 54.5 cents per mile
  • Miles driven for medical or moving purposes: 18 cents per mile
  • Miles driven for charity or volunteer purposes: 14 cents per mile

 

Instead of keeping a paper record of your mileage, consider taking advantage of technology!  Lots of apps exist to make tracking your mileage a breeze: