If you’re a small business owner, you can deduct your mileage on taxes as a business expense. But, make sure you’re following the rules about what drives you can deduct. Here’s what every small business owner should know about deductible business mileage.
Why should I care about my mileage?
Your miles can really add up. The IRS now lets you write off 62.5 cents for every business mile you drive in 2022. For miles driven from January 1st to June 30th, the previous rate of 58.5 applies. For miles between July 1st and December 31st, the new rate of 62.5 applies. When you add this deduction to the rest of your business expenses, it can create a major dent in your overall tax bill.
The more deductions you’re entitled to, the more you can lower your taxable income. A lower taxable income leads to a lower tax bill, which leads to more money in your pocket.
What drives can I write off?
You can write off any drive related to your business. This includes:
- Trips to meet clients
- Trips between offices
- Drives to get supplies
- Trips to the post office or bank, if it’s related to your business
- Drives to a temporary work site that lasts for less than a year
- Drives to the airport or train station if the trip is related to your business
Even if you’re not always on the road meeting clients, I bet you drive for work a fair amount. All those trips are costing you money through gas and wear-and-tear on your car. Your business miles are just like your other business expenses that you can deduct.
Make sure you’re getting the most out of your miles when it comes to tax time.
What drives can I not write off?
Your commute is never deductible. The IRS considers where you live a personal choice and thus, your commute from home to your place of business is a personal expense. This also applies to your last ride home from your place of work.
This is kind of a pain, especially considering the average commute is growing. But, there is a way to turn those commuting miles into a tax deduction.
How a home office can boost your deduction
A home office is a self-employment tax deduction you should claim. Not only can it be a significant amount by itself, it can also greatly increase the amount of business miles you can write off.
When you have a legitimate home office, trips that would have previously been considered a commute are now business miles. This is because you’re technically always driving from your place of business.
What records do I need?
The IRS won’t just take your word on how many business miles you drove for the year. You’ll need contemporaneous documentation of your trips—commonly known as a mileage log.
Your mileage log must contain: date of your trips, start and stop location, mileage of trips and the business purpose of drives. When you file for your deduction, you’ll also need to know how many commuting and personal miles you drove, so be sure to keep track of those, too.
You may want to consider a mileage-tracking app, as these can really take the hassle out of keeping a mileage log. The exact method you choose for tracking your mileage isn’t as important as you actually doing it. Stop leaving money on the road.
Marin Perez has been writing about how technology improves lives for about a decade. He’s excited to see how entrepreneurs are using tools like MileIQ to be more successful. When not working, he’s thinking about his next trip.
Keeping track of business transactions doesn’t have to be a hassle. Patriot’s online accounting software is fast, powerful, and accurate. Try it for free today!
This article is updated from its original publication date of June 28, 2018.
