Whether you are an entrepreneur business owner or travel to appointments on behalf of your employer, keeping track of your mileage is key if you want to be able to deduct travel expenses come tax time. Associate Partner Ren Cicalese III, CPA, MST explains the basics of what is deductible along with suggestions on how to best keep track of your miles.
Do you travel for work? More specifically, are you using your personal car to travel for work? If you answered those questions with a yes, you may be able to deduct your travel expenses on your tax return. One of the more common ways to do this is to keep track of how many miles you’ve driven during the year.
The IRS has rules in place that specifically outline the deductibility of miles driven. In most cases, the miles driven must have a business purposes. For instance, if you drive to the office and then drive to another site you will be able to deduct the miles related to that second trip. The miles you drive to commute to work, however, are not deductible. You can also deduct miles that are driven to attend business meetings outside of the office, conferences, and lunches with clients. You can even deduct miles driven to pick up office supplies.
One thing you should keep in mind is that the IRS will often check to make sure your employer does not offer reimbursement for miles driven on company time. If your company does provide a reimbursement, you will not be able to take a deduction for business miles driven.
Per IRS requirements, taxpayers must keep a log of the business miles they’ve driven for the year. The log must be thorough, accurate, and must contain the following information to satisfy the IRS’s requirements: (1) the odometer reading at the start of the year, (2) the date of the trip, (3) the starting point, (4) the destination, (5) the purpose of the trip, (6) the car’s mileage at the start of the trip, (7) the car’s mileage at the end of the trip, and (8) a list of any tolls or related expenses incurred during the trip. As you can see, the IRS requirements are pretty extensive.
Luckily for taxpayers, there are a bunch of apps that can be used to easily track this information for you. MileIQ and Everlance, for example, are apps that run in the background of your phone. These types of apps will automatically log all miles made while the app is running and provides the user with reports that can be used for his or her tax return.
Each year, the IRS publishes a mileage rate that is used to compute the tax deduction allowed on your return. For 2017, the published mileage rate is 53.5 cents per mile. Calculating the deduction is as easy as multiplying the business miles driven by the IRS rate. Let’s take a look at a quick example.
John Smith, a photographer, travels a lot for work. During the year, he has driven 2,000 miles commuting to and from his office. He has also driven 11,000 miles for business meetings and client appointments. As stated earlier, commuting miles do not count for the deduction. The business miles will qualify, though. 11,000 business miles multiplied by the IRS rate of 53.5 cents per mile lead to a tax deduction of $5,885.
If you use your personal car for business travel, you may be able to take a deduction on your tax return for travel expenses. Per IRS requirements, a travel log must be used to track business miles driven in order to take a deduction on your tax return. Using an app will help document the travel, and most apps will provide the reports needed to calculate the deduction. If you are unsure whether or not you can take a deduction for using your personal car for business travel, give us a call and we can help you determine if you are eligible.
Associate Partner
Ren III provides tax, accounting, and advisory services to a broad range of clients, with a specialty for manufacturers, title insurance companies, and professional service providers.
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