If you do any sort of driving for work, you might be eligible to claim mileage on your taxes.
It’s important to understand what types of driving the IRS allows employees and those who are self-employed to deduct on their tax return. We’ve compiled the guide below to help you make sure you’re writing off mileage in accordance with the latest IRS rules.
Track Your Business Mileage
To claim mileage deductions, you must first keep accurate records of your mileage. For decades, people have been tracking their business mileage with pen and paper.
Luckily, technology has advanced and now there are Mileage Tracker apps which makes recording business mileage easier than ever. Everlance is the top-rated mileage tracking solution, as it automatically and reliably tracks business mileage, and compiles all your data into IRS-compliant reports.
If you’re a business owner, it’s also a good idea to have specific requirements in place for your employees’ mileage logs. You can download a free Excel mileage log template to distribute to your staff, so they’re aware of what’s expected from their reports if they’re tracking their mileage manually.
IRS Standard Mileage Rate
The IRS Standard Mileage rate is the standard mileage reimbursement rate set by the IRS each year so that employees, contractors, and employers can use it for tax purposes. This rate fluctuates from year to year and applies to vehicles including cars, trucks, and vans.
For the 2019 tax year, these rates are:
- 58 cents per mile for business miles driven (up from 54.5 cents in 2018)
- 20 cents per mile driven for medical or moving purposes (up from 18 cents in 2018)
- 14 cents per mile driven in service to a charitable organization (currently fixed by Congress)
Most businesses structure their employee reimbursement policies around the IRS standard business mileage deduction of 58 cents, while other companies choose to implement a higher or lower rate to reimburse their employees.
For instance, if a business operates in an area that has higher fuel costs, then they may use a higher reimbursement rate than the IRS standard rate.
Even if a company does not have an employee reimbursement program in place, then employees may be able to deduct their business mileage expenses – using the IRS standard mileage rate – from their gross income.
Taxpayers also have the option of deducting actual expenses—including gas, insurance, parking, repairs and depreciation—rather than using the standard mileage rate, but many will agree that using this method can require a lot more time and work. Also, your total employee business expenses must exceed 2 percent of your adjusted gross income to claim this deduction.
How to Claim Mileage on Taxes
Employees can track their mileage to and from work obligations, while also documenting the purpose of each trip, and claim their mileage accordingly on their tax returns, but exceptions do apply. According to the IRS:
“A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. Additionally, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.”
Although this may be a given, employees can’t deduct their commute, as wonderful as that would be.
It’s also important to note the FLSA kickback rule, which is an exception concerning mileage reimbursements that companies need to adhere to if their employees are earning near or at the minimum wage.
Under the Tax Cuts and Jobs Act (TCJA), taxpayers can no longer claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. This deduction was eliminated from Schedule A alongside similar deductions. However, this does not affect deductions which are appropriately claimed on a Schedule C for those who are self-employed or independent contractors.
If you are self-employed or an independent contractor, these are the rules for mileage deduction and commuting. Your deductible miles depend on where your primary place of business is located. If you work from your home, all your miles are typically deductible anytime you get in your car and drive for any purpose related to your business.
According to IRS, if you drive to meet with a client, then return directly home, the entire trip is business-related and therefore deductible. You may also deduct driving costs from your business location to work-related activities, even if it’s just dropping packages off at the post office.
If you operate your business from somewhere other than your home, you can’t deduct the miles you drive to that location because that’s considered commuting.
Claiming Mileage: Business vs. Personal
It goes without saying that only mileage used for business purposes may be claimed on your taxes, not mileage used for personal trips. Commuting to and from your office is considered a personal trip, and so is that cup of coffee you stopped for on the way, even though many of us may need a daily dose of caffeine to do our jobs.
This can make things complicated when it comes to mileage tracking as many of us do run personal errands, like picking up our dry cleaning or making a stop at the grocery store, at the same time we may be driving for business reasons.
Everlance offers an easy solution for distinguishing between business and personal driving trips, even if they are blended into the same drive. Each time you get into your car to your next destination, open the Everlance app.
If you’re heading to a meeting with a client at their office, just swipe right for business. If you’re heading to meet a friend for dinner after a client meeting, just swipe left for personal. This way, all your business mileage is recorded separately, and Everlance will even calculate your deduction immediately, based on the standard mileage rate.
Everlance also allows you to track other types of business expenses. Just take a picture of your receipt and the app will store it securely in the cloud. You can even link your credit card or bank account directly to track expenses that way, as well.
When it comes time to prepare your taxes, just download your Everlance mileage and expense tracking reports and send it to your accountant. Everlance has been paving for the way for saving businesses and those who are self-employed tons of time, money, and hassle when it comes to tracking business mileage and expenses.
Whether you’re a business owner with multiple employees, or you are self-employed, Everlance offers customized plans to choose from based on your own company’s needs. Explore their mileage and expense tracking options and streamline your accounting, while also eliminating the guesswork and errors that, oftentimes, come with along with it.
about the author
Everlance, the #1-rated mileage and expense tracking app for freelancers. He has worked in almost ten countries with jobs ranging from training accountants in rural health centers, to designing digital products for international money transfer. Jake is passionate about helping freelancers thrive by making it easier to manage their finances. Contact him at firstname.lastname@example.org.Jake Cohen is Head of Partnerships at