The IRS loves to disallow deductions for vehicle expenses, and without the right documentation, you’ll risk losing out on this valuable deduction. Vehicle expenses include the driving you do for business, charitable, or medical purposes. See our previous post that explains the difference between business use and personal use of your car.
Tracking your mileage can save you big on taxes. Every year, the IRS publishes standard mileage rates for medical, charitable and business driving. Here are the 2017 rates:
• 53.5 cents per mile for business miles driven
• 17 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations
The IRS has stringent document requirements for vehicle expenses. To pass muster, your documentation needs to include the distance driven, the date and time, destination, and business purpose of each trip. Ideally, this should be kept in a contemporaneous log of your driving.
For decades, this meant keeping a paper and pencil log of your driving. This IRS publication has a sample vehicle log. However, very few people remember to record each trip consistently, which makes it easy for the IRS to disallow this deduction.
If you don’t keep a log and get audited, the IRS agent might let you reconstruct your mileage using another credible source such as a diary or daily planner. However, if you rely on this method, you’ll miss out on deductions for trips not included in your planner.
How to make it easy
An easier way to document your mileage is an app on your phone. There are many apps available today that make tracking your mileage easy as pie. Using your phone’s built-in GPS system, these apps record the date, location, and mileage. Then all you have to do is categorize the drive as a business, medical, charity-related, commuting or personal. This method is accepted by the IRS. At the end of the year, these apps create reports of your driving that you can easily download and send to your CPA.
How to choose
Cost — most have a free, but limited version. The free version might be adequate if you don’t drive much for business, or if you’re only tracking charitable or medical miles.
Ease of use — generally these apps detect when a drive starts and ends, and allow you to label favorite locations as ‘home’ or ‘work.’ They have some mechanism for classifying drives as a business, medical, charitable, or personal.
Impact on your phone’s battery — using your phone’s GPS can be a big drain on the battery, so most have some mechanism to limit that use.
Here are a few of the most popular mileage apps:
MileIQ (iOS and Android) — This is the most popular of mileage apps, and is one of the easiest to use. Just swipe left for personal, right for business. The free version lets you track up to 40 drives per month.
TripLog (iOS and Android) — This includes additional options for detecting when a drive begins, such as being plugged into a car charger or connecting via Bluetooth to your car stereo. TripLog also offers options for managing a fleet of vehicles. This app also allows you to snap photos of your vehicle-related receipts and saves them to the cloud.
Everlance (iOS and Android) — Everlance also allows you to snap photos of receipts to save as business expenses and allows you to manually input additional drives. Designed for freelancers, this app can be used to track all of your business expenses.
QuickBooks Self-Employed (iOS and Android) — This version of QuickBooks comes with an integrated mileage app that automatically imports your mileage data into your books.
Using an app means you won’t lose any of your deductions for driving, and you’ll have a complete record that will stand up to IRS scrutiny. We recommend that all of our clients choose a method for tracking vehicle mileage and use it consistently.
Do you need advice on documenting your vehicle mileage? Call our office at 561-624-2118 and we’ll help you make the right choice for your situation!