What Are IRS Mileage Log Requirements?

Expenses related to travel for business purposes throughout the year can really add up. You’ve got to pay for your gas and your car insurance at a minimum. If you’re using a personal vehicle, you’re also paying for all sorts of maintenance on your car, too. Not to mention paying for the vehicle itself.

If you’re putting business mileage on your car, you may need to know more about the standard mileage deduction offered by the IRS. Something as simple as logging your mileage can help you save money on your taxes every year. Keep reading to find out more!

Here’s What We’ll Cover:

The Two Methods for Business Mileage Deductions

How Should I Keep Track of Mileage?

Key Takeaways

The Two Methods for Business Mileage Deductions

When you visit the IRS’s website in search of the mileage log requirements, you’ll notice that there are two ways to report mileage. The first way is by reporting mileage using the standard mileage rate. The other is by reporting actual expenses, also known as the actual expenses method.

Requirements for the Standard Mileage Rate

To qualify to use the standard mileage rate according to the IRS, you must meet the following criteria:

• You have to own or lease the vehicle.
• You must not operate more than 5 vehicles. This would be considered a fleet. Fleet vehicle mileage records are reported differently.
• You can’t have claimed a depreciation deduction for the vehicle using any method but the straight-line method.
• You cannot have claimed actual expenses for a vehicle that you’re currently leasing after 1997.
• Miles must be recorded in an adequate and honest way. This can be done through a traditional log, but mileage tracking apps are much easier. They fill all of the mileage tracking requirements posed by the IRS should you be audited.

If you use a vehicle you own for business purposes, you have to use the standard mileage rate the first year it’s used. Then, in subsequent years, you can choose between the standard mileage rate and actual expenses. As of 2021, the standard mileage rate for vehicles is 56 cents per mile.

Requirements for the Actual Expense Method

Like the name implies, this method involves reporting all actual vehicle expenses to the IRS. Because the vehicle is used for business-related activities, a percentage of all maintenance done to it is eligible. Things like oil changes, tire rotations, and repairs are all eligible. So are your license and registration fees, in some states.

The most important thing when it comes to the actual expense method is saving receipts, and logging actual mileage expenses. Here are some tips about good recordkeeping:

• Download a mileage tracker app for business trips. It makes logging actual business miles much easier.
• Open a second bank account that’s dedicated to only business expenses. This will make receipt saving and expense tracking much easier.

How Should I Keep Track of Mileage?

If you use your vehicle for business purposes, logging mileage is an important part of running your business. You need to track mileage somehow. There are easy, inaccurate ways to do so, but there are better ways of tracking mileage nowadays thanks to technology. No matter how you’re doing it, the following things need to be recorded:

• The date of your business trip
• The starting point and trip destination
• The purpose of the trip (this helps rule out personal trips during audits)
• The vehicle’s starting mileage (mileage at the starting point)
• The vehicle’s ending mileage (mileage at the destination)
• Other trip-related costs (tolls, parking, gas, etc.)

There are a few ways of tracking all of this information when you’re using your vehicle for business trips.

Paper Mileage Logs

Paper mileage logs are the oldest way to keep track of your miles. Many notebooks are made today that have all of the required information for tracking purposes. These logs require the user to fill out the fields when they start and end their trip. It’s the tried and true method.

Mileage Tracking Apps

With today’s technology, mileage tracking apps have been made that allow users to skip the analog step of the process. Many of them are automated, and can help you save the time and effort it takes to track mileage manually. If you need to start tracking mileage and you carry a mobile phone, consider using an app!

For those who regularly use their vehicles for business, ensuring accurate mileage records is crucial for optimizing the mileage tax deduction and maximizing savings.

Key Takeaways

If you use your vehicle for business purposes, tracking mileage is probably a normal part of your routine. Be sure to keep detailed records and mileage logs to get the right deduction every time. While tracking mileage used to be a manual process, there are great apps that make it much easier!

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