Did you know that you can deduct business miles for your small business? This is one of the most overlooked tax deductions that business owners can take.

First let me say, if you use your car for business purposes only, you may deduct its entire cost of ownership and operations (subject to certain limits). But if you use your car for both business and personal, you may deduct only the cost of its business use. After speaking with a variety of business owners, they don’t even know they can write this off so the first question I get asked is what is it and how do I have to keep track of them and when do I need to start?

The answer to these I give is when you travel from your place of business to meet with a client for lunch, to complete work or anything that has to do with your business can be deducted. There are a variety of ways you can keep track including simply using pen and paper. You need to start like yesterday! So, if you haven’t already let’s start so you can begin taking part in this right away.

Who Can Take Advantage of This?

Even though this sounds so easy to do and take advantage of, there are things to know that are not considered business miles. Business owners can deduct mileage for the miles they drive business related. Driving from home to a place of business is not deductible. Driving from business to home is not deductible.

There are others these are just a few examples for small business owners can take.

Current rates:

2022 standard mileage rate:

Jan – June was 58.5 cents per mile driven.

July – Dec was 62.5 center per mile driven.

2023 Current Rates:

65.5 cents per mile driven

Standard mileage vs Actual expenses deductions

Standard is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil. The rate for medical and moving purposes is based on variable costs, such as gas and oil. The charitable rate is set by law. 

Actual mileage method, you must determine what it costs to operate the car for the portion of the overall use of the car that’s business use. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles.

Note: Other car expenses for parking fees and tolls attributable to business use are separately deductible, whether you use the standard mileage rate or actual expenses.

Please note that leased vehicles must use the standard mileage rate method for the entire lease period including renewals if the standard mileage rate is chosen. Lease vehicles do not have the option to change to actual expenses later on.

Keeping Records and Proving Miles

One thing you should always do is take a picture of your odometer the day you put the vehicle in service or the first day of the year and the last day of your business year whether that is a calendar year or fiscal year, it will vary depending on the business. This proves what it was at the start so you can always refer to this.

A few ways to keep a record of the miles you use are by doing the following:

Write down on pen and paper these specifics: The start of your odometer before you start driving to the destination → Write down on paper the miles on the odometer once you reach your destination → Write the miles on the paper on the odometer when you reach back to your place of business.

You can download an app that will keep track of both your personal and business miles. Here are a few that I have heard were good to use. If your accounting software does this for you then I would recommend using that so it can show within your accounting reports.

***Please keep in mind this does not mean that these are free. As of when I post these, I will provide if they are free or if they have a fee.

Everlance – free trial but may have a cost later. Learn more.

Stride – free app. Learn more.

QuickBooks online – comes with a subscription. Learn more.

MileIQ – free but paid options. Learn more.

TripLog – free version and paid options. Learn more.

Hurdlr – free version available with paid options. Learn more.

Depreciating Business Vehicles

When you depreciate your vehicle when using it for business, usually the Modified Accelerated Cost Recovery System (MARCS) is used by car owners to depreciate any car that was placed in service after 1986. However, if you use the Standard mileage rate in the year you place the car in service and change to the actual expense method in a later year and before the car is fully depreciated than you must use the straight-line depreciation over the estimated remaining useful life of the car. Don’t forget that there are limits on the how much you can deduct.

Where is this deducted on the tax return?

This is deducted on the form Schedule C on line 9. You will either use the actual expenses or the standard mileage rate. For Farmers, you would deduct on the form Schedule F line 10.

If you are an Armed Force reservist, a qualified performing artist, or a fee-basis state or local government official, complete form 2016, Employee Business Expenses to figure out the deductions for car expenses.

How long to keep records

The law requires you to provide evidence that supports the expenses that you have given by having adequate records or evidence to support your own statement. You should keep them as long as needed until the period of limitations for that return runs out. The IRS period of limitations is a specific amount of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. These limitations vary so I do recommend anywhere between 7-10 years to keep your income and expenses supporting documents.