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Understanding Tax Deductions for Mileage
July 29, 2021

Every fall, the IRS announces new standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

It’s important to check the new standard rates each year, as they don’t always increase. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, and for calendar year 2017, the business mileage rate decreased 0.5 cents per mile from 2016.

In 2017, the standard mileage rate is 53.5 cents per mile.

As a small business owner, you most likely use your car primarily for business, although that doesn’t mean you can write everything car-related off on your taxes. Because the IRS realizes it can be easy to be less than honest your car-related expense numbers, you can be sure the agency will look carefully to make sure the deductions are truly business-related.

Keep detailed records and receipts of each expense noting time and date. For gas mileage, detail dates, reason for the trip and anything else to prove the expense was related to your business, not picking your kids up from school.

Virtual and Home-based Businesses

Traveling to and from your office or business building does not count as a business-related expense, as everyone needs to get to work. Today, however, there are so many virtual businesses and businesses run from home that the rules have expanded. As a home-based business owner, you can deduct such trips as:

  • Traveling to meet a client in a home, office or coffee shop.
  • Picking up materials from office supply stores.
  • Checking on manufacturing or fulfillment services.
  • Driving to your warehouse or storage facilities.
  • Meetings with mentors or business advisors.
  • Speaking engagements, tradeshows and/or seminars.

Keep in mind, your home-based business must be your principal place of business.

Don’t forget to track expenses if you’re driving while out of town, although these fall under travel expenses in your tax organizer. Car rental expenses and gas purchased for the rental car should be included and documented in travel logs along with hotels, meals and business entertainment.

Doing the Calculations

Although using the standard mileage method is the easiest way to calculate the cost of using your car for businesses purposes, you don’t have to use it. Instead, you can use the actual expense method. Record what it actually costs to operate the car, including gas, oil, repairs, tires, insurance, registration fees, licenses and depreciation; then deduct the portion of the overall use of the car that is business use. Ask your tax expert which method gives your business the best scenario.

To keep automotive records, you can go the old-fashioned method and keep a journal in the car to jot down car mileage and expenses, but you may find it easier to download one of the following apps onto your mobile device.

  • TripLog: Available for iOS and Android devices, TripLog uses your mobile device’s GPS system to automatically chart your mileage. You can also upload receipts to a cloud server, and generate IRS-friendly reports.
  • QuickBooks Self-Employed: Tracking business mileage is just one of the features of the QuickBooks Self-Employed app. Plus, everything automatically syncs to your QuickBooks accounting system.
  • MileIQ: MileIQ from Microsoft automatically captures drive times. Then, just swipe to categorize trips into categories, such as business, personal, etc. You can also log additional details, such as parking fees or tolls.

Whichever option you choose, be sure to take the mileage deductions you’re entitled to. It will help you keep more money in your pocket.

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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

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