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ResourcesAccounting and Taxes

3 Ways To Track Miles for Taxes

Accounting and TaxesJune 20, 2023

If you're running late to a job site, it's easy to skip updating your mileage tracker and say you'll do it when you get back in your car. But then you get in your car and drive off to the next job site. Before you know it, your mileage log is woefully behind. After all, you're a busy business owner, and updating your mileage tracker is easy to put off until tomorrow.  

Unfortunately, this means you're leaving unclaimed deductions on the table at tax time. Before you say it's not enough to matter, consider this: the average rideshare driver drives about 50,000 miles per year for work. In 2023, that rideshare driver would have a total deduction of $32,750.

Learning how to track business miles for taxes and finding the best method for you is the best way to ensure you get your maximum deductions each year. 

Unless you're a freelance accountant, the self-employment and freelancer tax deductions can seem overwhelming for independent contractors and gig workers. One of the most common deductions for these types of workers is related to the vehicle used for work.

Tracking business mileage reduces your taxable income. As a result, you'll either pay less in taxes or—every business owner's dream—get a refund.

What Is Business Mileage?

The IRS allows you to claim a tax deduction if you use your vehicle for business purposes. This applies whether the vehicle is used solely for work or if you use your personal car for business. 

There are two options for deducting your vehicle expenses: tracking your business mileage or your actual expenses. Regardless of which method you choose, you’ll need to know how many miles you drove.

Business mileage refers to the miles you drive for business purposes. Generally speaking, many gig workers, self-employed people, and small business owners qualify. For example, people who work in the following industries often track mileage:

  • Rideshare

  • Food delivery services

  • Construction

  • Real estate

  • Home healthcare

  • Mobile repair/maintenance

  • Sales representatives

You can typically track miles for any travel from the office for business purposes. These instances include:

  • Travel from your office (even if it’s a home office) to another worksite and back

  • Travel from your office to a second business location and back

  • Running business-related errands

  • Driving a client (for example, picking them up from the airport when they arrive in town for a meeting)

  • Driving to and from a lunch meeting

  • Attending a conference in an area other than where you work

However, business mileage does not include driving from your home to your office or from your office to home. 

The IRS regularly updates the standard mileage rate to reflect inflation and other factors. The 2023 standard mileage rate is 65.5 cents per mile ($0.655), so the mileage tax deduction adds up quickly. 

To calculate your total deduction, multiply the miles driven per year by the mileage rate (0.655 in 2023.) 

For example, if you’re a realtor and you drove 8,500 miles in 2023 driving for work, you would multiply that by 0.655. Your total deduction for the year would be $5,567.50

How To Track Miles for Taxes

You need to keep a mileage log to file a business mileage deduction. Like any other self-employed expense reporting, your mileage tracking must be as accurate as possible to ensure you get the maximum deduction—and to protect you in the event of an IRS audit.

Your mileage log should include the following information, and ideally you’ll update it after every trip for the most accurate records:

  • Total mileage of the trip

  • Purpose of the trip

  • Date of the trip

  • Starting location

  • Ending location

So we’ve established that tracking miles is important. But exactly how do you do it? There are three main methods for tracking your mileage.

Method 1: Pen and Paper

The pen-and-paper method is the old-school physical logbook. You can purchase one online or at an office supply store or create a template and print it off yourself.

There are several pros to this analog method:

  • It’s familiar.

  • No technology is required.

  • It’s inexpensive.

However, the pen-and-paper method has its cons:

  • It is time-consuming to record everything by hand.

  • There’s a higher risk of mathematical errors.

  • The logbook can be physically misplaced or damaged.

  • You can’t easily search for specific entries or sort data to find driving trends.

Method 2: Digital Records

You can also opt to record your business mileage digitally. In this method, you can use a spreadsheet stored in the cloud that you update manually or a mileage tracker app. Either way, your mileage data is stored digitally.

The digital record method has some powerful advantages:

  • An app or tracking device can upload mileage data in real-time.

  • You don’t have to worry about losing or damaging a paper logbook.

  • You can easily export a mileage report.

  • The data is easily searchable and sortable to find trends.

  • Updates are automatic and math is calculated for you, make it less time-intensive 

  • There are fewer errors.

  • You don't need an additional device if the app is on your phone.

That’s a long list of pros, but there are some drawbacks to this method:

  • You still have to manually enter some data, such as the purpose of the trip.

  • Tracking devices raise some privacy concerns.

  • Batteries on devices can die and not record data.

  • Technology and app subscriptions can be costly.

Method 3: Hybrid Approach

The third option to track your business mileage is a hybrid approach. In this method, you use a mix of pen-and-paper and digital records to keep track of your mileage data. This is a good method for anyone interested in trying digital tracking but would like to leave the comfort of the pen-and-paper way.

For example, you might use a tracker and keep a pen-and-paper log that you fill out on each trip. Then you can compare the mileage data in the tracker to the numbers in your pen-and-paper log for accuracy.

You might also choose to keep a pen-and-paper logbook and use your phone to make digital notes when you forget the logbook at the office. When you return to the office or find your logbook, you update the records using the data on your device.

This hybrid approach is the most flexible and when you do both methods simultaneously, the most accurate. However, if you constantly switch or forget to consolidate all your logs into one place, this can be the most error-prone method.

Choosing the Best Business Mileage Tracking Method for You

There is no right or wrong way to track your business mileage as long as the data is accurate and complete. 

Look for a method that is accurate and reliable. 

If you can keep a pen-and-paper logbook accurately, that may be your best choice. But if you forget to update your log, an app that automatically updates is the best option.

Select a method that is efficient and saves you time. 

As a freelancer, you have a lot on your plate, and you didn’t start your business to update tax records. If you opt for the pen-and-paper method, you’ll still need a calculator to total up all those miles. It can be a lot of math if you’re driving every day.

Choose a method that is organized and accessible.

Getting an audit letter is enough to stress anyone out—don’t make collecting all your mileage notes on napkins and scrap paper another thing you have to worry about.

Organized data can also help you recognize trends in your driving habits and more accurately budget for gas and other vehicle-related expenses. 

Regardless of which method you choose, keep your records for at least three years in the event of an IRS audit.

Keep Your Mileage Tracking Up To Date

Tracking your business mileage should be treated with the same care and diligence as your bookkeeping. Whatever method you choose to track miles for taxes, it’s imperative that you are consistent and accurate.

Found has all the accounting and tax resources you need to help you get the most out of your deductions and make paying taxes a breeze. Sign up today.

The information on this website is not intended to provide, and should not be relied on, for tax advice.

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