How do I track mileage and vehicle expenses for my business?
The IRS gives you two ways to deduct vehicle expenses. The standard mileage rate lets you multiply your business miles by a set rate (67 cents per mile for 2024). The actual expense method lets you deduct a percentage of your real costs like gas, insurance, repairs, and depreciation based on how much you use the vehicle for business. You pick one approach and stick with it for the year.
Standard mileage is simpler. You just need an accurate count of business miles driven. Actual expenses can produce a larger deduction if you drive an expensive vehicle or have high maintenance costs, but you need to track every receipt related to the vehicle and calculate the business-use percentage. For most small business owners, standard mileage is the easier path and often comes out close to the same number.
Regardless of which method you choose, you need to log every business trip. The IRS requires the date, destination, business purpose, and miles driven. “Drove around for work” doesn’t cut it. “March 14, drove to Johnson property at 4th St and Ray Rd for site inspection, 22 miles” does.
Use a mileage tracking app like MileIQ, Everlance, or Dext. These run in the background on your phone and automatically detect trips. At the end of each day or week, you swipe to classify trips as business or personal. This takes about two minutes and gives you a clean, defensible log if you’re ever questioned. Trying to recreate a full year of mileage from memory at tax time is a gamble you don’t want to take.
If you use your vehicle for both personal and business driving, only the business portion is deductible. Your commute from home to a regular office does not count as business mileage. But driving from your office to a job site, a client meeting, or the supply store does. If you work from a home office that qualifies as your principal place of business, trips from home to job sites or client locations can count as business miles.
Record your odometer reading on January 1 and December 31 each year. This gives you total miles for the year, which combined with your tracked business miles, establishes your business-use percentage. That percentage matters for both deduction methods.
Once you have your mileage data, it needs to flow into your books. Your QuickBooks ProAdvisor in Chandler can help set up the right account to capture vehicle expenses so they show up correctly on your financial statements and make tax prep straightforward. The deduction itself gets calculated on your tax return, but having clean records throughout the year is what makes that calculation accurate.
The biggest mistake business owners make is not tracking consistently. You drive 25,000 business miles a year but can only document 15,000 of them because you forgot to log trips for three months. That’s roughly $6,700 in deductions you can’t claim. For service-based businesses like skilled trades where you’re driving between job sites all day, those lost deductions add up fast.
Start tracking now, even if the year is already underway. Partial records are better than none, and building the habit today means next year you’ll capture everything.
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