Tax-compliant Mileage Log

MileWiz can help you immensely when it comes to mileage. If you simply report your mileage to an employer and you get reimbursed, all you really need is to present your business related log. However, if you need to claim tax deductions based on your mileage or related to your vehicle expenses, you will need to keep a few other things in mind.

Important attributes of mileage logs

There are 2 ways to claim tax deduction for your unreimbursed business driving expenses. You can report your miles or you can report vehicle’s expenses. In the USA, report miles with Schedule C on your tax return, but report direct vehicle expenses with Schedule A. Contact us at hello@milewiz.com if you need assistance with learning how to report mileage in another countries.

In both cases, you would need a mileage log that lists the following:

• odometer at the beginning of the fiscal year

• odometer at the end of the fiscal year

• a list of all business trips where you point out:

  • start time

  • origin address

  • end time

  • destination address

  • distance in miles if your country uses the imperial system, or in kilometers if your country uses the metric system

  • purpose of the travel (meeting clients, vendors, making deliveries, visiting project sites, etc)

It’s simple but it’s a lot of work. With MileWiz this can be automated to a large extent.

When to track your trips

Let me start by saying - you should always track your trips, even when not driving for business. This will give you several benefits:

• You will not accidentally forget to re-enable tracking when you resume driving for business, so you will not miss trips

• Tracking your non-business trips will help you keep the odometer correctly adjusted

• Tracking all trips ensures that you won’t miss the trips when visiting doctors, hospitals or pharmacies. This way if you happen to qualify for tax deduction for medical expenses (this is your medical expenses are in excess of 10% of your gross adjusted income), the recorded medical mileage will allow you to claim a higher amount.

• Tracking all trips ensures that you record your trips when you volunteer for non-profit organizations.

At the end of the year, if you have all your trips recorded, you can make an assessment - whether you need to claim your direct vehicle expenses or simply your mileage, in case you are eligible for both.

Decide how to claim mileage

When you make the assessment, check what percentage of your total miles are categorized as business. The total of your vehicle expenses should be multiplied by that number. For example, if 70% of your miles are related to your business and you’ve spent $10,000 on gas and maintenance, you can claim $7,000 tax deduction. This would be an equivalent of driving 12,174 miles in 2020 (at the 57.5c/mile rate).

If you decide to go with direct expenses, make sure that you kept all receipts that prove those expenses - include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (financing and lease payments included).

Regardless of which method you choose, keep the receipts for parking and tolls as those are additional expenses you can claim tax deduction for.

Convenience of using the standard mileage rate

In many cases, keeping receipts for all expenses related to your driving is simply not feasible. If you will doing this method, you need to be super diligent about keeping those. Additionally, you might not feel compelled to do it, if a small percentage of your total driving is business-related (less than 50%).

At the other spectrum - if you drive a lot, your vehicle depreciation isn’t much or gas is cheap in your area, the standard mileage rate would probably be a very generous number for you. For example, if you are driving Uber, your total mileage is 30,000 miles / year, and your Uber related driving is 90% of that, with standard mileage rate your tax deductions is $15525 (that’s your deduction, not how much you save - don’t get too excited just yet). To be able to claim the same with direct vehicle expenses (excluding parking and tolls, as you can claim those on top of the standard mileage rate deduction), your actual expenses should be $17,250 or more.

How much would I save

You can use your business mileage to claim tax deductions. Tax deductions are not tax credits, meaning that the amount that you claim is not the amount that you save. Read more about the difference here. Claiming tax deductions means that you are reducing your taxable income, so how much you save depends on your tax bracket.