Mileage = Money
You have car expenses, so let the business pay for them!
Make it your New Year’s resolution to improve tracking your business expenses, including mileage. Don’t leave money on the table.
Before you read any further, record your odometer reading for the end of 2020 and the start of 2021! Take a picture and save it in a file called Tax Related Documents 2021.
Great, now to determine which method you will use… There are two ways to get a mileage deduction:
If you choose to deduct auto expenses you are following the actual method. With the actual method, your tax preparer will deduct a percentage of your actual auto expenses including gas, maintenance, insurance, and lease payments or depreciation. The deduction is a percentage based on tracking all miles and dividing business miles by total miles driven.
Standard Mileage Deduction
The second way is the standard mileage deduction. This method allows you to deduct 57.5 cents per business mile. (rates will vary depending on the year)
Both methods require you to track your miles. Yes, regardless of the method, you must track miles in order to get the deduction.
Yes, regardless of the method, you must track miles in order to get the deduction.
While the standard mileage deduction may be easier, your actual expenses may be higher than your mileage allowance. You should compare to determine which one will give you the greatest deduction.
- Travel for business meetings
- Travel for networking events
- Travel for business errands – post office, bank, office supplies
Unfortunately, driving from home to your office and back does not count.
How To Track
Calculating your mileage can be daunting but it doesn’t have to be.
First, take a picture of your odometer (you should have already done this). That way you have evidence of your starting mileage for the year.
Second, determine how you will track your trips.
If you use QBO (Quickbooks online) you already have access to a mileage tracker. Just download the app and swipe left or right. Here are detailed instructions.
Another easy-to-use mileage app, also the one I use, is MileIQ. For a limited time, you can use the code KFAI769A for 20% off.
Do you take less than 30 trips per month? Check out the free version of Everlance.
If you don’t do a lot of driving or if your driving is very predictable a spreadsheet may work for you.
Third, and possibly most important, create a reminder to review and update your mileage log each week while your travel is fresh in your mind. I have my reminder set up in Asana.