Can Contract Workers Deduct Mileage?

by Kevin Boone ; Updated July 27, 2017

An independent contractor is self-employed and performs services for customers, businesses and corporations. A self-employed contractor runs his own business — his customers aren't required to withhold taxes when paying him; the contractor is responsible for reporting the taxes. The contractor must determine the costs of a project, including transportation costs, and factor these costs into his overall fees.

Standard Mileage Rate

The standard mileage rate is $0.51, or 51 cents per mile, for business mileage. As a contractor, you can deduct this expense on Form 1040, Schedule C. To use the standard mileage rate, you must claim it during the first year your vehicle is placed in service. For leased cars, the standard mileage rate must be used for the entire lease period. Business-related parking fees and tolls are deductible in addition to the standard mileage rate.

Actual Expenses

Alternately, you can claim your actual vehicle expenses incurred while doing business. Actual expenses include gas, oil, repairs and maintenance, titles and registrations, licenses, DOT certifications, tires, depreciation, lease payments and insurance. Actual expenses also include business-related parking fees and tolls.

Restrictions

You can either use the standard mileage rate or the actual expenses for your vehicle but not both. You can calculate both ways to see which method works in your favor. If you have a fleet exceeding four vehicles, you must use actual expenses. As of 2011, if you use your vehicle for hire — e.g., a taxicab or courier — you can use the standard mileage rate. Before 2010, contractors who used vehicles for hire had to use actual expenses: They can now use either method.

Documentation

To substantiate claims for mileage deductions, you must keep accurate records. Keeping a mileage log and recording each trip as you go can save headaches later on. Keep receipts, invoices, repair slips, notes, registration documentation and other important papers together. Each trip entry should include starting and ending mileages, the date and purpose of the trip, the mileage to and from each destination, the cumulative mileage and the destination. You should also have a note stating the vehicle mileage at the time the vehicle was placed in service. Additionally, log books, trip logs, notebooks, pens and ledgers can be deducted as office expenses.

Caveats

You must allocate personal, commuting and business use of your vehicle. You can't deduct personal or commuting miles. Vehicles include cars, vans and pickup trucks.

About the Author

Kevin Boone is a current student at Chattanooga College and graduated from Pellissippi State in 2000 with an associate degree in electrical engineering. He has written safety-related procedures and documents for organizing power system components and holds his A+ Certification for Computers.