Providing accurate information regarding mileage can seem daunting but doing so will help avoid the possibility of penalites if audited, or missing out on your business deduction entitlement. When claiming a vehicle for business use, the IRS requires the following information:

  1. Dates of travel
  2. Mileage of trip
  3. Purpose of trip
  4. Places driven
  5. Total number of miles driven for the year

The IRS recommends keeping a daily, detailed log of this information. Depending on your personal preference this can be done the old-fashioned way on paper, or by utilizing apps, such as our mileage tracker on our “H+A CPA” app.  Business mileage covers any trips from one workplace to another, visits with clients or customers, business meetings, travel to suppliers, and travel to temporary workplaces, only if temporary location will last 1 year or less. Commuting, travel from home to work and vice versa is not business deductible.

There are two methods to calculate deductions for vehicle expenses, which are the “actual costs” and “standard mileage rate”. Both have their advantages and disadvantages. With the actual cost method, you will use all expenses incurred by the operation of your vehicle, such as: maintenance and repairs, gasoline, insurance, tires, licenses, etc. Once those are calculated, you multiply it by the percentage of use for business in the year. With the standard method, you will only use the business mileage and multiply it by the standard Mileage Rate for the tax year. If using the standard method, you cannot deduct the operational expenses, instead they are already included in the rate. Costs for business tolls and parking are in addition to the standard mileage rate. If using the standard method, you must do so in the first year of the vehicles use, then you may switch between using either method in the following years, however you will switch later to the actual method, you will have to use the straight-line method to depreciate if the vehicle is not fully depreciated. If you started using the standard mileage rate for a leased vehicle, then you will have to continue this for the entire lease period, including renewals.

The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional tax services information.

Call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730 as required to set up an appointment.