Deductions for business mileage can be worth a lot and are often one of the most overlooked deductions by business owners.
If you take the standard mileage deduction, you can deduct 56 cents (2014 rate) for every business mile you drive. If you use the actual expense method, you can deduct the cost of your gas, repairs, inspection, registration, insurance and other expenses based on the business percentage driven all year. Either way, you have to know how many business miles you drove during the year. You must also keep track of the total miles you drove during the year by taking odometer readings on January 1 and December 31.
A difficult method for tracking your mileage—and the way the IRS would like you to do it—is to keep track of every mile you drive every day, 52 weeks a year, using a mileage logbook or business diary. This means you’ll list every trip you take, whether for business, commuting, medical or personal reasons. If you enjoy record keeping, go ahead and use this method (stock your car with plenty of pens).
For more info see: http://www.irs.gov/pub/irs-regs/travel_entertainment_faq_v1.pdf.
Most people choose a simpler method – they just keep track of the total business mileage for the year then deduct that from the total miles driven; the rest of the mileage is put under commuting and personal miles.
A simpler method for tracking total yearly business mileage may be to keep a small log book in your car and write down 3 pieces of information about every business trip:
1. Date of travel
2. Purpose (client name, or other business purpose like banking, office supply shopping, business conference, meeting with CPA)
3. From/to. Write down where you left from (office, home, etc.) and the address or some information about the place where you are going. You can record the actual mileage if you want, or you can add this in later from a map program on the Internet. The important thing is to record where you started and ended the trip.
One of the most confusing aspects for business owners to understand is that commuting miles are not deductible to business, just like they are not deductible to regular employees. So the regular miles from home to office (your regular place of business) is NOT deductible. If you are reimbursed by your employer for commuting and personal miles or if you use the company vehicle for commuting or personal purposed, these miles must be include as income in your W2.
If you love spreadsheets, this log could also be done in a simple spreadsheet format or if you are really tech savvy you can use an electronic application. While Logbooks are available in any stationery store; there are hundreds of apps that you can use to record your mileage with an iPhone or similar device. For example, check out MileTracker http://tinyurl.com/lel5w5w for the iPhone or Expensify www.expensify.com.
The less paper the better!
Davis & Hodgdon Associates CPAs has been assisting nonprofits, individuals and businesses with tax and accounting services in the Burlington Vermont Metro area for more than 20 years. If you have any questions or concerns please feel free to call 802.878.1963 or email [email protected].
Elizia Meskill, Enrolled Agent
Davis & Hodgdon Associates CPAs