Mileage tracking refers to keeping a log of miles driven for tax deduction or reimbursement purposes. For 2017 tax filings (that are due by April 17, 2018), you can claim a 53.5-cent deduction per business mile (54.5 cents per mile for 2018 tax filings). 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 as Deductible Mileage?
First, determine what qualifies as business mileage. The IRS has 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.
How to Track Your Business Mileage
Keep track of each trip, because if you are ever audited, the IRS expects pristine records. You could use paper and pencil, and the IRS has examples of worksheets that can be used for tracking business expenses here.
The easiest and most effective way to do this is to use an app to track it all for you. The mileage tracking app for QuickBooks Self-Employed is unique because it automatically tracks mileage and integrates it into QuickBooks 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 categorization, 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 mileage rate, which in 2017 is 53.5 cents per mile. For example, if by the end of the year you’ve driven 25,000 miles, your total mileage deduction will be $13,375.
25,000 miles x 53.5 cents/mile = $13,375
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 QuickBooks Self-Employed, the app will do the mileage math for you.
Tracking Mileage for Medical, Moving and Charity
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. For 2017 tax filings, those who qualify can deduct 17 cents per mile driven for medical or moving purposes (18 cents per mile for 2018 tax filings), and 14 cents per mile driven in service of charitable organizations. Since the app tracks everything and lets you categorize, QuickBooks Self-Employed can handle this, too.
QuickBooks Self-Employed is a great way to track mileage. 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.