As a small business owner, you may use your personal vehicle to make sales calls, visit customers, buy supplies and attend meetings. According to the IRS, if you are using your car for business purposes, you can deduct these expenses on your taxes. Here's how to record and calculate your driving costs per mile in a manner that will satisfy an IRS audit of your business.
Calculate Your Costs Per Mile
Buy a small notebook and stash it in your glove compartment. Whenever you drive your vehicle for a business-related activity, write in the notebook the date, purpose of the trip, starting mileage from the odometer (e.g., 55,462) and ending mileage from the odometer (e.g., 55,482) and total trip miles (e.g., 20 miles).
You may also wish to include any parking charges or tolls in your log at this time.
At the end of the tax year (usually the end of the calendar year), review your log and add all of the business-related mileage you put on your vehicle.
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View the IRS mileage allowance by going to the official IRS website and viewing "Publication 463: Travel, Entertainment, Gift, and Car Expenses." Under the chapter labeled "Transportation," read the Standard Mileage Rate section. This section defines how much per mile you can claim for a business deduction. For example, in 2012 the rate was 55.5 cents per mile.
Enter the dollar total for all business mileage on your tax forms. For sole proprietors using Schedule C, enter the total on line 9 and complete Form 4562. Review the IRS Publication 463 for more details if you are not a sole proprietor using Schedule C.
Tip
Always keep the log in your vehicle so you can easily enter your odometer readings. Many office supply stores also sell mileage logs.
Warning
If your vehicle is only used for business (not a mix of business and personal use), these calculations may not apply to you. Consult an accountant or see IRS Publication 463 for more details.
From the IRS Publication 463, "If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. You cannot deduct depreciation, lease payments, maintenance costs, oil, insurance, or vehicle registration for that year." Consult an accountant on whether the standard mileage deduction is suitable for you.
- If your vehicle is only used for business (not a mix of business and personal use), these calculations may not apply to you. Consult an accountant or see IRS Publication 463 for more details.
- From the IRS Publication 463, "If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. You cannot deduct depreciation, lease payments, maintenance costs, oil, insurance, or vehicle registration for that year." Consult an accountant on whether the standard mileage deduction is suitable for you.
Warnings
- Always keep the log in your vehicle so you can easily enter your odometer readings. Many office supply stores also sell mileage logs.
Tips
References
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