Learn about various methods of tracking miles for taxes
No matter where or how you work, taxes are inevitable. But one benefit of being self-employed is that you can lessen your tax burden by tracking your business spending and deducting that amount at the end of the year. And if you use your vehicle for your work, you can also deduct the business mileage you rack up on your vehicle.
Tracking your mileage can get tricky, especially if you use your vehicle for both personal and business purposes. You can’t deduct anything for the miles you drive for personal reasons, which is why tracking your business mileage is so important.
If you wait until tax time to figure out your business mileage, it’s going to be nearly impossible to figure out what your business mileage was. That’s why you should track it all year long. Here are some of our favorite ways to track your business mileage.
The Internal Revenue Service (IRS) allows you to deduct business expenses when you file your taxes. It also recognizes that if you’re using your vehicle for business, that’s an expense that you should be able to deduct.
There are two methods of deducting vehicle expenses when you’re using your vehicle for both business and personal use. No matter which method you use, you’ll still need to learn how to log your miles for taxes.
The first method is to keep track of your total expenses for the vehicle and then figure out what percentage of those expenses should be attributable to your business. You find out the percentage by tracking your total vehicle mileage as well as your total business mileage for the year. You’ll also have to keep track of every automobile cost like gas, oil changes, repairs, and more. Sounds pretty complicated, right?
The second method is simply to track your business miles and use the IRS’s standard mileage rate, which is 62.5 cents per mile for the last six months of 2022. The IRS typically updates the rate at the beginning of every calendar year.
Clearly, keeping track of your business mileage requires a lot less paperwork (and math!), so most self-employed people use this method. You can read more about the IRS’s rules about mileage deduction here or ask your accountant which method is best for you.
So how do you keep track of mileage for taxes?
There are a few ways you can keep track of your mileage for taxes. No matter which way you choose to track your mileage, you should plan to keep to this key information for every business mile you drive:
- Total mileage driven
- Start and stopping points for your trip
- Purpose of your trip
You may also include more information, such as your odometer readings before and after your drive. Your mileage log may also be a great place to keep track of receipts such as parking fees or toll roads.
You can use the old-fashioned method of using a notebook and pen to keep track of your mileage. Another method is using a spreadsheet program on your phone. While either of these will work, the difficult part may be remembering to enter the information each time to leave or return from driving business miles.
The best method may be to use apps to track your mileage. Almost all of this information will be recorded automatically with almost no input from you.
When you’re thinking about how to record mileage for taxes, you’ll probably want something easy to use, reliable, and one that requires little effort on your part. If that describes you, you’ll probably want to use an app to record your mileage.
If you’re already using QuickBooks Self-Employed for your finances, you may be surprised to learn that they have a mileage tracking feature too. This is a popular option to help you manage your mileage using tools you already have.
But if you’re looking for a stand-alone mileage app to record mileage for taxes, Mile IQ is another frequently used option. It’s available for both Android and Apple and keeps track of every drive, making sure each mile is tracked, even if you forget about tracking.
There are many ways to keep track of your mileage, but the best way is the one that works best for you. If you know you’ll remember to write everything down for each business trip you make, a pen and paper may be the best choice. But if you want the option of tracking every mile you drive and then categorizing each trip as business or personal, an app is probably the best way to track your mileage.
There’s a lot to juggle when you’re self-employed, and keeping track of your miles is just one more thing to add to the list. No matter how you decide to track your miles, indi’s tools can help you make sure you’re on top of your self-employment finances. Save for taxes, track your expenses, and do your banking from wherever your job takes you with indi.
QuickBooks and Mile IQ and all related trademarks and brand names are the property of their respective owners. indi has no affiliation with these products and does not endorse their use.
This post is for general information purposes only and are not intended to provide legal, tax, accounting or financial advice.