Mileage is a popular business deduction, but taking advantage of it has gotten more complicated as the IRS cracks down on mileage deductions by not allowing estimates to be used in an audit. In fact, unless you provide complete and accurate records, your entire mileage deduction can be rejected, even if you can prove that you drove for business during the year.
To deduct business driving, you must provide substantiation by adequate records, which generally means you must be able to show:
- The date of the trip
- The starting point
- The destination
- The business purpose of the trip
- Total miles driven (which can be shown with odometer readings)
- Tolls or other trip-related costs
Your annual mileage log also must include your vehicle's odometer reading at the beginning and end of the year and the total number of miles driven during the year for business, commuting and personal driving. To help prove the mileage, third party records are helpful. We recommend having your car serviced each year as close to the first of the year as possible so you have someone else vouching for your total mileage.
The IRS has specific rules about what type of business driving is eligible for a mileage deduction. While your daily commute from your home to your permanent work location is not an eligible business mileage deduction, travel to a second company location that is not your primary office may qualify. Travel to and from business conferences, off-site meetings and business-related events, including meals with current or prospective customers, may qualify. You also can deduct the mileage for customer visits or running business-related errands, such as picking up supplies or having documents notarized.
To make sure your records are complete and meet the IRS requirements, it’s a good idea to use a formal logging system. You can use a notebook that you keep in your car and update daily, (free mileage log templates are available online) or you can use a mileage tracker app on your smartphone. This type of app is easy to use and many are always on unless you turn it off. These mobile phone apps will generally use the GPS in your smartphone to track the mileage. We have found the simplest one to use is MileIQ, which automatically calculates the mileage for every trip and users swipe each drive as personal or business. You can track multiple cars and, for personal use, you can designate categories such as commute, charity, medical, moving and more.