Expenses

How to Claim Mileage on Taxes in the U.S.

It’s important to understand what types of driving the Internal Revenue Service (IRS) allows employees and the self-employed to use as a tax deduction on their tax returns. Distinguishing between business miles and personal miles can be a little confusing so we’ve built a mileage deduction guide below to help make sure you’re writing off mileage per the latest IRS rules.

Track Your Business Mileage

To claim mileage deductions on your next tax return, you must first keep accurate records of your mileage. For decades, people have been tracking their business mileage with pen and paper as a way to help them deduct mileage come tax time.

Luckily for you and tax professionals everywhere, technology has advanced, and now there are mileage tracking apps to make recording business mileage easier than ever. Mileage Tracking is available within the FreshBooks iOS app or FreshBooks Android app, it automatically and reliably tracks business mileage, then compiles all your mileage tax deduction data into FreshBooks for you.

If you’re a business owner, it’s also a good idea to put specific requirements in place for your employees’ mileage logs. You can download a free Excel mileage log template to distribute to your staff so they’re aware of what’s expected from their reports if they track mileage manually.

How to Claim Mileage on Taxes

Tracking and claiming mileage deductions can help reduce your tax burden, whether you’re a self-employed worker, a business owner, or an employee receiving mileage reimbursement. This guide explains the current rules, methods, and opportunities for maximizing your mileage-related tax savings.

If a company does not have an employee reimbursement program in place, employees cannot deduct their business mileage expenses on their personal tax return unless they are Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses.

The Impact of the TCJA on Mileage Deductions

Before the Tax Cuts and Jobs Act (TCJA), employees could deduct unreimbursed business mileage expenses. However, this deduction is suspended through the 2025 tax year. Businesses now typically reimburse employees for business-related vehicle use, which is tax-deductible for employers and often not taxable for employees, depending on the reimbursement structure.

Key Mileage Deduction Methods

1. Standard Mileage Deduction

The IRS standard mileage rate for 2024 is:

• 67 cents per mile for business miles driven  (up 1.5 cents from 2023)
• 21 cents per mile driven for medical or moving purposes (down 1 cent from 2023)
• 14 cents per mile driven in service to a charitable organization (currently fixed by Congress)

To calculate your deduction, multiply the business miles driven by the applicable mileage rate. For instance, 1,000 business miles at 67 cents per mile would yield a $670 deduction.

• Keep a detailed mileage log to document dates, destinations, purposes, and odometer readings.

2. Actual Expenses Method

• Deduct actual car expenses, including fuel, maintenance, insurance, depreciation, parking fees, tolls, and lease payments.
• You must calculate the percentage of your vehicle used for business purposes and apply that percentage to your total vehicle expenses.

Most businesses use the standard mileage deduction as the foundation for their employee reimbursement policies. Other companies implement a higher or lower number than the standard mileage rate to reimburse their employees.

For instance, if a business operates in an area with higher fuel costs, it may use a higher reimbursement rate than the IRS standard mileage rate.

If a company does not have an employee reimbursement program in place, employees cannot deduct their business mileage expenses on their tax return.

For Employees: Mileage Reimbursement Options

1. Flat Car Allowance

• A fixed monthly amount (e.g., $500) is given to employees for vehicle use. However, this is taxable income and subject to FICA taxes.

2. Mileage Reimbursement

• • Employers reimburse employees at a set cents-per-mile rate, typically using the IRS standard mileage rate. This reimbursement is tax-free if it does not exceed the IRS rate and accurate mileage records are maintained.

For Self-Employed Workers

If you’re self-employed or an independent contractor:

• Home as Your Business Base: If your primary place of business is your home, all work-related trips are considered deductible. For example, driving to meet clients or deliver packages counts as deductible mileage.
• Office-Based Business: Mileage to and from your primary business location is considered commuting and is not deductible. However, trips from that location to conduct business-related activities are eligible for the mileage deduction.

Additional Deduction Opportunities

• Parking Fees and Tolls: Deduct these alongside mileage for business trips.
• Medical and Charitable Purposes: Special mileage rates apply. Ensure these align with IRS guidelines for unreimbursed medical expenses or charitable organization work.
• Depreciation Deduction: If you use the actual expenses method, you may also qualify for depreciation of your vehicle.

Maximizing Tax Savings

• Use tools or apps to maintain a mileage log and track business mileage expenses.
• Consult a tax professional to ensure compliance with IRS regulations and maximize your tax deductions.
• Choose the method—standard mileage or actual expense deduction—that offers the greatest tax savings.

Claiming a mileage deduction can be a valuable tax break for employees, self-employed workers, and small business owners. By keeping accurate records, understanding IRS rules, and consulting a tax expert, you can reduce your tax liability and ensure compliance. For more details about claiming a mileage deduction, visit the IRS website or speak with a qualified tax advisor.

Claiming Mileage: Business Trips vs. Personal Trips

When it comes to mileage tax deductions, only miles driven for business purposes qualify for your tax return. Personal trips, including commuting from home to your office or stopping for coffee on the way, are not deductible, even if they feel work-related.

For many, the lines can blur as personal errands, such as picking up dry cleaning or groceries, may occur alongside business-related trips. The IRS mileage deduction rules require clear separation between business mileage expenses and personal use, which is why accurate mileage tracking is essential.

The Importance of Mileage Logs and Apps

To deduct mileage effectively, maintaining a mileage log is critical. Mileage tracking apps like FreshBooks Mileage app are efficient tools for self-employed workers and small business owners to differentiate between business miles and personal trips. These apps can:

• Automatically track your annual mileage in real-time.
• Allow you to categorize trips as either business or personal.
• Provide detailed records that comply with IRS mileage rate requirements for the applicable tax year.

Why Proper Classification Matters

Failing to distinguish between business-related trips and personal use could lead to overclaiming mileage and potential issues with the Internal Revenue Service. Whether using the IRS standard mileage rate or the actual expenses method, accurate classification ensures compliance and maximizes your eligible tax deductions.

By leveraging tools like mileage trackers, you can ensure your business mileage expenses are correctly documented, making it easier to claim mileage and achieve meaningful tax savings.

Mileage Deduction Made Easy

Understanding how to calculate mileage for taxes is crucial for simplifying your tax preparation. By using tools like FreshBooks to track business mileage and expenses, you can efficiently compile the necessary reports for your accountant or tax professional. This streamlines the process of claiming your mileage deduction, ensuring all eligible vehicle-related costs are included in your tax deduction calculations. With accurate records, you’ll save time, reduce hassle, and potentially maximize your tax savings on your return.

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This post was updated in November 2023.