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.
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.
Tips
Always keep the log in your vehicle so you can easily enter your odometer readings. Many office supply stores also sell mileage logs.
Warnings
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.
References
- IRS.gov
- IRS Publication 463, Travel, Entertainment, Gift and Car Expenses
- IRS: IRS Announces 2012 Standard Mileage Rates
- Internal Revenue Service. "IRS issues standard mileage rates for 2020." Accessed Feb. 3, 2020.
- Internal Revenue Service. "Standard Mileage Rates." Accessed Feb. 3, 2020.
- Cision PR Newswire. "Runzheimer Data Sets 2017 IRS Business Mileage Rate at 53.5 Cents." Accessed Feb. 3, 2020.
- U.S. Government Publishing Office. "H. R. 606." Accessed May 1, 2020.
- Internal Revenue Service. "Publication 463 Travel, Gift, and Car Expenses," Pages 13-15. Accessed Feb. 3, 2020.
- Internal Revenue Service. "Publication 526 Charitable Contributions," Page 6. Accessed Feb. 3, 2020.
Tips
- Always keep the log in your vehicle so you can easily enter your odometer readings. Many office supply stores also sell mileage logs.
Warnings
- 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.
Writer Bio
Veronica Summers is an Internet pioneer, creating websites for Fortune 500 companies since 1994. In over 15 years of writing for the Web, she has received awards for explaining complex topics in an easy-to-read manner. Summers holds a Bachelor of Science in technical writing from Carnegie Mellon University. She writes computer- and travel-related articles online.