If you have used one or more of your vehicles to earn business income over the past year, you can claim the related expenses as a business expense on your income tax in the United States by using a mileage log. But as always, if you want to deduct these expenses, you need to substantiate your claim with evidence in the form of an automobile mileage log book.
- The IRS requires business owners to keep good records of business expenses, including for business use of a car.
- You can use a purpose-designed log book to track your mileage and expenses, a simple sheet of paper, or a smartphone app that captures the details automatically,
- A log can be especially helpful if the vehicle is used for both business and personal use.
How To Keep a Mileage Log
The Internal Revenue Service (IRS) says you must keep accurate records of business expenses, including for business automobile expenses. This is true whether you choose to claim the deduction using the standard mileage method or the actual expenses method.
The following details should be recorded in your log book any time the vehicle is used for business purposes:
- Business purpose of your trip
- Vehicle starting mileage
- Vehicle ending mileage
- Total miles driven
- Vehicle expenses, type (gas, oil, tolls, etc) and amount
Sample Paper Mileage Log
Mileage log books are usually available at office supply stores or you can make your own. You can use the example from the IRS below to create your own in a spreadsheet or word processor.
Automatic Mileage Tracking
Manually entering trip information in a log book is tedious, particularly if you make a lot of business trips. Fortunately, there are several mileage tracking applications available for Apple and Android smartphones that make use of the phone's GPS to keep track of every mile driven for business purposes. These apps will log your business trip information and enable you to download a mileage summary on your tax return. Some of the more popular mileage tracking apps include:
- MileIQ: IiS and Android
- Mileage Expense Log: iOS only
- TripLog: iOS and Android
- QuickBooks: Mileage tracking is included with QuickBooks Self-Employed
Business Use vs. Personal Use
The IRS is vigilant about excessive claims for business use of personal vehicles, claiming most or all of your vehicle mileage for business use may attract extra scrutiny from the tax authorities and a possible audit.
Therefore, when it's time to claim your motor vehicle business expenses, you will need to know how many non-business-related miles you drove. This can be easily accomplished by determining the total miles you’ve driven in a year by comparing your vehicle’s odometer reading at the end of the tax year to what it was at the beginning of the year.
You can keep an accurate record of your car expenses for parts of the year ("sampling") and use that to extrapolate for the entire year. Just be prepared to demonstrate that your sample period is representative of the entire year.
Once you have your data for the year, to calculate your motor vehicle expenses claim, you need to tally all of the miles you’ve driven for business use over the course of the year. Your personal use is then the total mileage for the year minus the business mileage.
Business Use vs. Personal Use for Employees
Employees who use company vehicles must also keep track of mileage driven for business purposes versus personal use mileage. Mileage driven for personal reasons is a taxable benefit that has to be included in employee income. Note that mileage driven to and from a regular place of employment—other than to the location of a business call—is considered commuting and is classed as personal use.
Make sure you have a clear policy on the personal use of company vehicles, including:
- Who can drive the vehicle, such as the employee only or spouse
- What is allowable for personal use, for example, using a company truck to tow a camper or boat
- How to keep accurate mileage records
The Bottom Line
Keeping good records of business expenses is important for accuracy at tax time, and for ensuring you claim all the deductions you're entitled to. Whether you track your business use of a car in a simple paper logbook or a smartphone app, make it habit to jot down the details as you go.
Frequently Asked Questions (FAQs)
How do you keep your mileage record?
The simplest way to track your mileage is with your car's odometer and a paper log book, marking down the odometer reading at the start of a trip and again at the end. Simple subtraction will tell you how far you've traveled. Smartphone apps that track mileage make the process even easier.
How do I track my personal mileage on a company car?
Personal use of a car provided to you by an employer is considered a fringe benefit, and subject to income tax. You can use a log book, a spreadsheet, or a dedicated mileage app on your smartphone to track both business and personal use of a car.