The IRS lets you write your miles off on taxes, but it won’t just take your word for it. You’re going to need a mileage log to back up your claims. Let’s go over a few different ways to track mileage for taxes.
What’s Required From Your Mileage Log?
You’re going to want to keep a contemporaneous mileage log. That means you must keep your records immediately or shortly after drives occur. There’s still ambiguity in the Tax Courts about how long after your trips is too long, but it’s better to be on the safe side.
Along with the odometer reading at the beginning of the year, be sure to log:
- Dates of your trips
- Mileage for each trip (note: you don’t need odometer readings for each trip)
- Business purpose of the drive
- Locations of the places you drive
When you fill out your Schedule C to claim the mileage deduction, you’ll also need to know the number of miles you drove for commuting and for personal, non-commuting miles.
Manual Mileage Log
The cheapest way to track your miles for taxes is to do it by hand with a paper mileage log. Simply jot down the information you need for all your drives, and you’ll have a compliant log. The upside of this approach is that it’s inexpensive and easy to get started.
Manually tracking your miles doesn’t sound tough, but just think about it: you have to write down every single drive. It doesn’t matter if you’re running late for an important client or if there’s a great song playing on the radio as you arrive, you have to remember to write down every trip.
Even if you manage to do that (congrats, by the way), you’re faced with having to manually calculate the value of those drives during tax time. Manual mileage logs can also be easily lost or damaged. This is problematic because you have to keep these tax records for up to seven years after you’ve filed your taxes.
Using a mileage log spreadsheet is another way to track your mileage. With a spreadsheet, you don’t have to do manual calculations, and it’s more secure than a paper mileage log. Most of us have smartphones, so you can easily just enter in your trips before and after each ride.
Of course, that means you still have to record every single drive in order to get the most tax value out of your miles. In fact, we’ve even heard of people who double up on work: they manually record their miles in a notebook and then transfer it over to a spreadsheet for every single drive.
This approach is prone to error. It’s easy to forget to log drives or to mess up data entry.
Mileage-tracking apps have grown in popularity over the years. It’s the perfect combination of the growth in smartphones and the fact that apps solve the tedious, yet important, problem of tracking mileage for taxes. When choosing a mileage-tracking app, look for those that can provide automatic tracking, standard reporting, and security.
Automatic tracking removes the hassle of having to manually start and stop the tracking of your drives. You or your tax pro will really appreciate standardized reporting at tax time. Because this information is vital to your taxes (and could show where you’ve been), be sure to choose an app you can trust.
On the downside, you will need a smartphone to use a mileage-tracking app. Some apps might be more expensive than a manual solution or a spreadsheet. Although, don’t forget that completely free apps have to make money somehow, so they may be selling your data to third-parties like advertisers.
However You Do It, Track Your Miles
If you’re self-employed or freelance or you own a small business, your miles are worth money when it comes to a tax deduction. In fact, your miles are worth even more in 2018 thanks to the increased standard mileage rate of 54.5 cents per mile, which is one cent per mile higher than the 2017 rate.
So no matter how you do it, if you use a personal vehicle for business miles, be sure to track your miles!
For more helpful tax information, contact Liberty Tax® directly at 1-877-at-Liberty, or visit a conveniently located Liberty Tax® office near you. For real-time updates, follow Liberty Tax® on Facebook and Twitter.