Mileage tracking refers to keeping a log of miles or kilometers driven for tax deduction or reimbursement purposes. That means every mile driven to meet clients, run business errands or grab work supplies will add up to one thing: cash, either deducted from your taxes or reimbursed after you file. Uber drivers, photographers, Etsy shop owners — anyone who is self-employed — we’re talking to you. Here’s a rundown on everything you need to know about tracking business and personal mileage for your taxes.
What Counts and What Doesn’t?
First determine what qualifies as business mileage. Governments have strict rules about what counts and what doesn’t. For example, traveling between offices and worksites, driving to meet a client for drinks or heading to the store for business-related supplies counts. But commuting anywhere from home doesn’t — even if you’re taking a business call in the car or going into the office to meet a client.
Keep track of each trip, because if you are ever audited, you will need pristine records. The easiest and most effective way to do this is to use an app to track it all for you. The mileage tracking app (available for US customers) for QuickBooks Self-Employed (QBSE) is unique because it automatically tracks mileage and integrates it into QBSE with your other deduction tracking.
The app automatically determines start and stop locations based upon your time in transit and the amount of time you spend at a location, all the while using almost no excess battery life. Just like how the app handles expense categorisation, you can swipe left for business miles or right for personal miles when the tracked mileage is logged.
Standard Mileage Rate vs Actual Expense Method
Once you have a record of your miles, you can determine the amount you can deduct. There are two ways to determine this: the standard mileage rate method or the actual expense method.
Qualifications for the standard mileage rate method vary depending on if you own or lease the car and for how long, as well as what claims you’ve made on the car in years past.
If you qualify to use this method, you simply multiply your business miles by the applicable standard IRS mileage rate for 2019.
To use the actual expense method, you have to determine what it costs to operate the vehicle for your business use. This includes gas, oil, repairs, tires, insurance, registration fees, licenses and depreciation or lease payments. It’s a lot of record keeping.
If you qualify for both methods, you may want to calculate them both to see which will yield you the larger deduction. If you use QBSE, the app will do the mileage math for you.
While those who are self-employed have access to the highest deduction rate and fewest restrictions, that doesn’t mean there aren’t other reasons to track your mileage. There may be deductions you can make for medical or moving purposes and for charitable organisations.
QBSE is the answer for mileage tracking. With it, you can also determine your quarterly tax liability and fill out the current IRS forms for making those payments. Explore the app’s time- and money-saving features, including automatic tax tracking, snap and store receipts, effortless invoicing, and more.
See the full list of features available in your country here.
Who needs to track their Mileage?
In the USA, if you drive your car for business purposes, claiming your mileage can be an easy way to get a tax break. But the IRS considers mileage deductions easy targets for audits because there are strict restrictions on what type of mileage qualifies for a deduction.
These restrictions depend on what type of work you do and where you do it, and many people mistakenly claim deductions that don’t qualify. Talk to a local tax expert or accountant to find out what’s applicable in your country of residence. Read on to find out what considerations there are for tracking mileage in America.
Documenting your miles means you keep a travel log. To save you time, here’s a guide for who needs to track their business mileage and who doesn’t, as well as some tips on the easiest way to track your mileage.
You Should Track Your Mileage If
If you work for an employer and intend to claim deductions from business travel (beyond just commuting to and from work), you will need to itemise your deductions using Schedule A. To claim these deductions, track your mileage for:
- Travel between offices at two different work locations
- Travel from home to a temporary job site outside your permanent work location where you expect to work less than one year
- Travel for business-related errands, such as depositing bank slips or buying supplies
- Travel to meet clients
- Travel for business meals or entertainment while meeting clients
- Travel to the airport for business trips
If you’re self-employed, you should track any mileage that falls into the above categories, but you will claim it as an expense on Schedule C rather than itemising it on Schedule A.
- If you work from home, your home qualifies as your principal place of business, so you don’t commute. You can, therefore, claim deductions for miles traveled to other business locations, such as a second office or a client’s office.
- If you’re unemployed and looking for work, you can deduct miles traveling to find a new job in your current occupational field, but not miles traveled while looking for a job in a new industry.
- If you are relocating at least 50 miles for work, and if you work full-time 39 weeks in the 12 months after your move, you can also claim a smaller deduction.
- If you drive for medical or charitable reasons, you may also qualify for a smaller deduction.
Track your mileage no matter what or how you plan to deduct. If you use standard mileage to calculate your deductions, you use a fixed rate set by the IRS, and you cannot claim vehicle-related expenses such as registration, maintenance and repairs, which are already factored in. If you choose actual expenses, you can include these other vehicle-related expenses, but your mileage isn’t factored in.
Save time tracking by using an app with automated mileage tracking features. There are many competing mileage tracking apps, but QuickBooks Self-Employed has the advantage of automatically integrating your mileage tracking with your other deductions, saving you time and hassle separating your business and personal expenses.
You May Not Need to Track Your Mileage If
- You work for an employer and your only business-related travel is commuting to work
- You work for an employer and you don’t intend to itemise your deductions using Schedule A
- You work from home and don’t travel for business purposes
- You’re unemployed and not traveling to seek jobs in your current occupational field
If you’re tracking your miles manually, your log should include dates of trips, starting points, destinations, reasons for travel, starting and ending mileage, and travel-related costs such as parking and tolls for business trips (however, you cannot deduct fees for parking at your normal workplace). If you’re using QuickBooks Self-Employed, the app automates your log-keeping for you.