Why You Need to Track Your Business Miles
There are many reasons why you should track your business miles. Some of these reasons include saving money and getting tax deductions.
Actual Expense Method vs. Standard Mileage Rates
You have two options for calculating your mileage deduction. The first is the standard mileage rate, which is the default method. This method allows you to calculate the miles you travel for business purposes and then multiply it by the IRS’s standard mileage rate.
The second option is the actual expense method. This method requires you to take detailed notes of every expense incurred during the tax year. These expenses include licenses, registration fees, insurance, gas, and tires. If you use this method, you will receive a larger deduction than the standard mileage rate.
Both methods are based on miles driven, but the actual expense method adds up all the expenses for a particular vehicle. You can expect a larger deduction if you drive a more expensive car. However, the standard mileage rate may be better if you drive a small car.
For example, in real estate mileage log template keeps track of your journeys and computes your mileage reimbursement for each.
It is easy to use, in line with IRS requirements, and aesthetically pleasing. Overall, it’s an excellent option for handling your taxes or asking a client or employer for travel reimbursement.
Selecting a plan that gives you the most significant deduction is essential. When choosing the proper method for your business, you should consider your situation and your tax advisor. Also, you should try both ways for the first year if you qualify for either one. After that, you can switch back and forth between the two methods.
It would help if you first decided whether you want to deduct the actual costs of driving a vehicle for business or the standard mileage rate. If you choose the standard mileage rate, you will be limited to the expenses incurred during the first year. On the other hand, the actual expense method can be used for the rest of the vehicle’s life.
An automatic mileage tracking app is easier and more cost-effective for many businesses. However, you can use a spreadsheet if you want to save money on something other than an application. Ensure you record each drive’s date, start and end time, and odometer reading.
Tax Deductions
If you drive a car for business, you may be eligible. However, you’ll need to keep accurate records of your miles. It will help if you track your mileage in a logbook, bank account, or credit card. In addition, you can use an app to track your business miles.
If you drive a car for work, you can claim tax deductions for up to 12,000 miles per year. You’ll be able to claim even more if you keep accurate records of your actual car expenses.
The IRS offers two methods for calculating your mileage deduction. First, you can use the Standard Mileage Rate. This method is easy to understand. It uses the IRS standard rate of 57.5 cents for 2020.
The amount you can deduct depends on the percentage of your driving for business. Another way to calculate your mileage deduction is the Actual Expenses Method. While it is more time-consuming than the Standard Mileage Rate, it can save you more money.
The IRS wants you to track your mileage for at least 52 weeks each year. Suppose you are self-employed or work as a 1099 contractor. In that case, you must record business-related mileage on Schedule C.
Keeping accurate and detailed mileage records can help you get your business’s most significant tax deductions. You’ll be asked to provide proof of your business-related mileage when you are audited.
The Standard Mileage Rate method is more straightforward to calculate than the Actual Expense Method. With this method, you multiply your qualifying miles by the IRS standard rate.
To determine the best way for you, compare the IRS’s methods and determine which will save you the most money. Some online calculators can make the process simpler. Remember, though, that you must track your mileage daily.
Saving Money
Keeping track of your business miles is a must if you drive for business, but you need to do it correctly, or you could end up paying a pretty penny in fines. Fortunately, there are some clever ways to do it. Using a mileage tracking app is just one of them. Some require a single tap to capture your business driving. A delivery route planner will also help you get the most out of your mileage budget.
You can do a lot with a GPS-based tracker, but you must be careful about the data you collect. While most tracking apps use smartphone technology to record your mileage, you should remember that these apps are designed for the business world, not the personal automobile. This may cause some of your data to get lost in the shuffle.
Several other methods to track your business miles include spreadsheets and logbooks. The IRS is very particular about the accuracy of these records, so be sure to pay attention to their specifications. For example, if you are a real estate agent, you may be subject to more stringent requirements than other types of businesses.
You can save a bundle on your next tax return with the right software and a little know-how. For the best chance of claiming the tax write-off, track your business miles. A GPS-based tracking system is also a great way to ensure that your business trips are tracked and documented correctly. A detailed log of your business driving will help you avoid a potential audit.
Even if you do not have a computer, there are many cheap and free ways to do this. One of the most efficient is to use an Excel spreadsheet to keep track of your trips and mileage. Another smart move is to keep a paper logbook.