Can I deduct mileage, and how do I not leave that money behind?

If you drive for work, the IRS effectively pays you back for it, through the standard mileage deduction. It adds up to real money over a year. The catch, and it's the whole catch, is that you only get it if you tracked the miles.

The what. The standard mileage rate is a set amount per business mile that the IRS updates each year, and it's meant to cover the whole cost of driving, gas, wear, insurance, depreciation, all rolled into one number. You multiply your business miles by that rate, and that's your deduction. There's an alternative method based on tracking actual vehicle costs, but for most small businesses the standard mileage rate is simpler and often comes out fine.

The why it matters: this is money you've genuinely earned the right to deduct, and it's easy to lose. Owners who don't track end up either claiming nothing, which overpays tax, or estimating, which is exactly the kind of guess that doesn't hold up if anyone asks. "I drive a lot" is not a deduction. A mileage log is.

The how, and what actually counts. Business miles are trips for work: driving to a client, to the bank for the business, to pick up supplies, between job sites. Your commute from home to a regular workplace generally doesn't count, which surprises people. What the IRS wants is a record showing the date, the miles, and the business purpose of each trip. The good news is you no longer keep a notebook in the glovebox. A mileage-tracking app runs in the background, logs your drives automatically, and lets you swipe each one as business or personal. Set it up once and it does the tedious part for you.

The when: track as you go, all year. Reconstructing a year of mileage from memory in April is both miserable and exactly the kind of record that looks made-up, because it sort of is.

If you're not sure which trips qualify or which method is better for your situation, that's worth a conversation, and a CPA can confirm the finer points for your specific case. We'll make sure it's captured cleanly so it's there when you need it.

Related reading: Why photographing your receipts matters more than you think · What are quarterly estimated taxes, and do I actually have to pay them?

True North Co · Bookkeeping for small businesses · Hugo, MN

← Back to the blog