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Keeping Track of Business Mileage


This is another one of those "do as I say, not as I do" things.  I went to talk to my CPA about reducing my taxes because I made a profit in my business last year.  One of his first questions was, "What kind of mileage do you have for your business?"  OOPS!  I never kept track of mileage last year; most of my sales were via Internet, and my consulting was local.  But I realized I was missing a BIG deduction, because I forgot my own advice about keeping track of all the little things.

Capture All Information

You can't deduct what you can't prove, so you must capture the business information to take the deduction.  The best way to do this is to keep a small log book in your car and write down 3 pieces of information about every business trip:

  1. Date of travel
  2. Purpose (client name, or other business purpose like banking, meeting with CPA), and
  3. From/to.  Write down where you left from (home, etc.) and the address or some information about the place where you are going.  You can record the actual mileage if you want, or you can add this in later from a map program on the Internet.  The important thing is to record where you started and ended the trip.

If you think you may be using actual expenses, rather than the standard IRS mileage deduction, include information on any expenses, like gas/oil, and the amount.

If you use the same car for business and personal use, you must also record the mileage at the beginning and end of the year, so you can calculate a business use percentage.

IRS Requirements for Mileage

The IRS wants "timely and accurate" records.  They expect you to keep a "daily log showing miles traveled, destination and business purpose." My CPA suggested I look back through my 2009 business calendar to see if I recorded any trips, but it might be difficult for the IRS to accept any records I produce, since they weren't created at the time of the travel.

Business Mileage and Taxes

After you capture and record your business mileage, the next step is how to include this information on your business tax return. The two methods of reporting mileage are "actual" and "standard." This article explains the difference between the two mileage reporting mileage; there are advantages and drawbacks to each and there are also some restrictions on reporting actual mileage.

Bottom Line: Start now to keep track of your expenses for business use of your car, even if you don't think there will be many business trips.  Getting into the habit in January is better than losing out next April.  Take it from me, I'm going to get a notebook and start recording everything right now.

For More Information

Calculating Business Mileage for Tax Purposes

Business Auto Expense Deductions FAQ

2010 IRS Standard Mileage

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