If you use a vehicle for your self-employed business, you may be able to deduct the business-related expenses. There are two general deduction methods: standard mileage and actual expenses.
QuickBooks Self-Employed uses the standard mileage method. But, you should also track all of your vehicle expenses in QuickBooks. This lets you decide which deduction method you want to use when you file your taxes.
Each method has advantages. Here are some general guidelines. For the most up-to-date info, refer to the IRS website.
How vehicle deductions work
What you can deduct depends on how you use your vehicle. If you use it exclusively for business, you may be able to deduct the entire cost of using your vehicle. However, if you use it for both business and personal purposes, you can only deduct the business costs.
One method may be more beneficial depending on your tax situation.
Tips for tracking your miles
- Track your miles and vehicle expenses in QuickBooks. At the end of the year, you can decide which deduction method you want to use to track your business mileage.
- Pick one deduction method and stick with it. TurboTax or your tax pro can help you decide which method is best for you. It's very difficult to switch between methods. Learn more about switching methods from TurboTax.
- Commute mileage is separate from business mileage. Commuting to your self-employed work may seem like work. However, it's not considered business mileage from a tax perspective.
See an example
If you’re a dog-walker and you regularly drive from your home to a client’s home to pick up the pups, those are considered commute miles.
When you transport the dogs to and from the dog park for exercise, you're working. Those are considered business miles.
- If you track miles with the MileIQ app or Google Timeline, you can import your miles directly into QuickBooks Self-Employed.
Get help with tax questions
For a deeper dive into standard vs actual expense methods, check out this guide from TurboTax. Also, the TurboTax community is a great place to find answers. Read FAQs, ask questions, chat with an agent, or give experts a call.