Get More Mileage Out of Your Deductions: Start a Mileage Log!

Mileage can be an important deduction, but you need to keep good recordsDo you use your vehicle for business?  Did you use it to look for a job?

If you itemize your deductions and want to deduct those mileage expenses, it’s imperative that you document those miles with a mileage log.  Driving even one mile per day for business in 2015 would have added up to a deduction of $209.88!  Since the IRS needs your total mileage for the year, it’s important to start keeping track as of January 1st – which is fast approaching!  Make a New Year’s resolution to start that mileage log and make sure you get the deductions you’re entitled to.

Some tips and things to consider:

You don’t need to purchase a specialized mileage log.  While the logs available at places such as Office Depot work great, you really just need a memo pad large enough to write all of your entries and information.  You should write something along the lines of “2016 Mileage Log” and your name on the cover, then keep track of the date, starting and ending mileage, destination, and business purpose for each trip.  Also, for those looking for a paperless solution, apps such as MileIQ can help you keep track electronically.

You should keep a mileage log even if you have a car dedicated to only business use.  An IRS auditor will be skeptical of anyone claiming 100% business use for a vehicle, and you’ll need a mileage log to prove it to them.

Mileage spent commuting from home to work is NOT considered business mileage.  Driving from your home to work, or from work to home, is considered a personal expense by the IRS, and is not deductible.  The trip itself must have a business purpose; just because you made a business call while driving to the supermarket doesn’t make the mileage deductible.

HOWEVER, mileage spent commuting from home to a temporary work location may be deductible.  If you’re required by your employer to commute to a temporary work location for a period of time that you realistically believe to be less than one year, then the mileage to and from that location is considered business mileage.

If you have a home office that qualifies as your principal place of business, then you may deduct mileage from your home to another business location.  The key phrase there is “qualifies as your principal place of business” – just because you work out of your home doesn’t necessarily mean it qualifies.  The IRS has several requirements on what they consider a qualifying home office; check for more information to make sure you’re playing by the rules.

Miles driven while searching for a job can be deductible.  The caveat here is that you cannot be a first-time job seeker, and the job you’re seeking must be similar to your current/last occupation.  This applies even if you are currently employed.

You may elect to deduct your actual vehicle expenses rather than standard mileage.  The standard mileage rate for 2016 is 54 cents per mile, which is a large decrease from the 2015 rate of 57.5 cents per mile; the IRS is estimating that, on average, your vehicle costs that much to operate.  Obviously, some cars will cost more to operate, others less, so the IRS has given you the option of deducting your actual expenses instead.  You will still need to keep a mileage log, however, since your expenses will be prorated by your business-to-personal mileage ratio.  For example, if your car incurred $10,000 of expenses to operate for the year, and you drove 10,000 miles (of which 5,000 were for business), then only one-half, or $5,000, would be deductible.  This method is most appropriate for older vehicles, which tend to be more expensive to operate.  For your first year, it is recommended to keep track of your vehicle expenses for the year and see which method will work best for you.