A guide for self-employed people who track, manage, and deduct their mileage.
Welcome to the Everlance business mileage hub, your ultimate resource for understanding and maximizing mileage deductions for self-employed individuals, employers, and employees. Whether you're navigating mileage for your IRS tax deductions or seeking to streamline your mileage reimbursement process, our hub is a one-stop shop offering a wealth of information, tools, and resources to simplify your journey.
Before diving into the nitty-gritty details, it's essential to grasp the basics of business mileage and why it’s important. In simple terms, business mileage refers to the distance you travel in a vehicle for work-related purposes. This can include traveling to meet clients, driving between different work locations, or running business errands.
This means different things for different people, depending on the role you’re in, but if you’re using your vehicle for business purposes, your mileage is important to understand as a way to offset the costs of fuel, maintenance, and wear and tear on the vehicle. Understanding how business mileage works is crucial for self-employed, contractors, employers, and employees to understand to ensure fair compensation, compliance with IRS regulations, and making sure you’re getting all of the tax benefits that are available to you.
Essentially, mileage reimbursement is a system by which employers compensate their employees for the use of their vehicles for business-related activities. It serves as a way to offset the costs of fuel, maintenance, and wear and tear on the vehicle. Understanding how this reimbursement works is crucial for both employers and employees to ensure fair compensation and compliance with IRS regulations.
For Self-Employed or 1099 Contractors: You can deduct your business mileage from your self-employed taxes to account for the vehicle costs incurred for work.
For Employees: If you use your vehicle for work, you may be eligible for mileage reimbursement from your employer.
For Employers: If you offer mileage reimbursements, you can account for these as business expenses, reducing your tax liability.
Now that we've covered the fundamentals, let's dive deeper into the various aspects of IRS mileage reimbursement.
You need to ensure you’re only logging miles that meet the standards and requirements laid out for deductions and reimbursements. First and foremost, the driving must be directly related to your job. This means that if you use your vehicle for both business and personal purposes, you should only claim mileage reimbursement for the business-related portion of your driving.
The IRS lays out the types of trips you can deduct as:
Traveling between different workplaces, as long as they're within the city or general area where you pay taxes (your "tax home").
Visiting clients or customers for business purposes.
Attending business meetings that are not at your regular workplace.
Commuting from your home to a temporary workplace, even if you have one or more regular places of work. These temporary workplaces can be within or outside your tax home area.
For example, if you're a rideshare driver, you can deduct not only the miles when you have a passenger, but also the miles between jobs, trips to the gas station for business, and other business-related driving. If you're a realtor, traveling from the office to an open house you're hosting is tax-deductible, as is the trip to pick up appetizers for the attendees.
Note that commuting miles to and from your home to your regular workplace are typically not deductible. For a more detailed explanation of commuting rules, check out our guide to commuting and mileage deductions
The IRS publishes the federal standard mileage rate each year. This sets the per-mile rate for operating vehicles for business, medical, or charitable purposes.
67 cents per mile for business purposes
21 cents per mile for medical purposes
14 cents per mile for charitable purposes
65.5 cents per mile for business purposes
22 cents per mile for medical purposes
14 cents per mile for charitable purposes
Our in-depth guides will help you learn more about the 2024 IRS Mileage Rate as well as historical IRS mileage rates and how they are determined
Tracking and recording your mileage accurately is not only vital for reimbursement purposes but also for maintaining organized records. Here are some best practices to help optimize your mileage tracking:
Start with a dedicated mileage logbook or app to establish a central record-keeping system.
Create a routine for entering your mileage data promptly to ensure accuracy.
Regularly review and reconcile your mileage records with other relevant documents, such as expense reports.
Keep track of non-commuting business mileage, such as trips to meet clients, attend conferences, or conduct site visits.
By implementing these best practices, you can streamline your mileage tracking process, minimize potential errors, and maximize your mileage reimbursements.
Use a mileage tracking app: There are various mobile apps available that can help simplify the process of recording your mileage. These apps use GPS tracking to automatically log your trips and calculate the distance traveled.
Keep a physical log: If you prefer a more traditional approach, maintaining a physical logbook can be helpful. Record the date, starting point, destination, purpose of the trip, and the number of miles driven for each business-related journey.
Maintain supporting documents: In addition to tracking your mileage, it's essential to retain supporting documentation, such as receipts for parking fees and tolls, to substantiate your business-related travel expenses.
Accurate mileage tracking not only ensures you receive the appropriate reimbursement for your business travel but also helps you stay organized and compliant with tax regulations. By implementing these tips, you can streamline the process of tracking your mileage and calculating your reimbursement, saving you time and effort in the long run.
The IRS allows two methods for calculating deductible vehicle expenses: the standard mileage rate method or the actual expense method.
The standard mileage rate method involves multiplying the number of business miles driven by the standard mileage rate set by the IRS for that tax year.
The actual expense method requires you to track all vehicle-related expenses, such as gas, maintenance, insurance, and depreciation, and then deduct the percentage used for business purposes.
For those who elect to take the standard mileage rate, It's crucial to keep detailed records of your business-related driving activities. Mileage logs are required to include:
Date
Purpose of the trip
Starting point
Destination
Total miles driven
This documentation not only helps you accurately calculate your mileage reimbursement but also serves as valuable evidence in case of an audit or reimbursement dispute. Staying informed about the current IRS mileage rates is essential to ensure that you’re not overpaying your taxes and in compliance with tax regulations.
Check out our in-depth guide for more information on the IRS requirements for mileage.
As electric vehicles (EVs) become increasingly popular, understanding how to calculate mileage reimbursements and tax deductions for EVs is essential for both employers and employees, as well as self-employed individuals.
Mileage Reimbursements: Employers can reimburse employees for business-related mileage in their electric vehicles at the standard IRS mileage rate, which covers all vehicle expenses, including charging costs. Employers may also choose to reimburse at a different rate, considering the typically lower operating costs of EVs compared to gasoline vehicles.
Documentation: Employees should keep accurate records of their business-related travel in their electric vehicles, including dates, destinations, and miles traveled, to support their reimbursement claims.
Tax Deductions: Self-employed individuals can deduct business-related mileage driven in their electric vehicles using the standard IRS mileage rate. This rate is designed to cover all vehicle expenses, including the cost of electricity for charging.
Record-Keeping: It's crucial to maintain detailed logs of business travel in your electric vehicle, including the purpose of each trip and the number of miles driven, to substantiate your tax deductions.
Charging Costs: While the standard mileage rate accounts for vehicle operating costs, it's important to note that electricity prices can vary significantly by region. You may want to track your actual charging costs to compare with the standard rate.
Environmental Incentives: Electric vehicles often qualify for additional tax incentives and credits. Be sure to explore these opportunities to maximize your financial benefits.
With proper logging and tracking, calculating your mileage is easy! In this guide, we’ve covered what business mileage is, what counts as business mileage, what the current rates are, and how we track it. The last piece of the puzzle is putting that all together!
In the most simple terms, you just take those miles and multiply them by the applicable rate. So for example, in 2024 every 1,000 miles you drive for business would be good for $670.
Input your totals into our mileage calculator to see how much your miles are worth!
Understanding IRS mileage reimbursement rules is crucial for self-employed, contractors, employers, and employees. By grasping the basics of mileage reimbursement, navigating the federal mileage rates, defining business mileage, decoding IRS guidelines, keeping accurate records, and calculating mileage reimbursement accurately, you can ensure compliance while making sure you’re not leaving any dollars on the road!
The IRS may request your mileage log and other documentation to verify your deduction. It's essential to keep accurate and detailed records to support your claim.
No, the IRS standard mileage rate applies to all types of vehicles, including cars, vans, trucks, and SUVs. However, there are separate rates for charitable, medical, or moving purposes.
No, you cannot deduct both gas and mileage. You must choose between the standard mileage rate (which covers all vehicle expenses, including gas) and the actual expense method (where you can deduct gas and other vehicle expenses separately).
Gas, insurance, maintenance and repairs, oil, tires, lease payments, registration and license fees, depreciation.
Depreciation is built into the standard mileage rate, but if you do decide to take actual expenses, details on how to calculate that can be found in IRS Publication 463. We’ve also built this handy car depreciation calculator and guide to help!
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