Are you getting the maximum deduction you’re entitled to when you use your vehicle for business purposes? Are you overestimating it?
For small businesses, taking your mileage deduction may be a little trickier than simply keeping tabs on miles driven for work and multiplying that by the standard per-mile rate the IRS allows.
First, you need to be clear on what counts as business miles and what doesn’t. Then keep accurate records of miles you’ve logged, parking fees and tolls you paid, and business activities that required your car.
It’s important to know how to claim your deduction, as it varies for sole proprietors, S corporations and partnerships.
If you decide to go the longer route and itemize actual expenses your car or pickup incurs in service to your business, which might yield a bigger write-off, be aware of what’s involved.
In this article we spell it all out to help you get it right. And we suggest a few apps that can tame the onerous task of record-keeping.
The IRS defines business mileage as the distance you drive between two places of work. This might include:
If your home is your primary workplace, travel from there to other business venues qualifies as acceptable business mileage.
If, however, your main office or worksite is elsewhere, driving from home to that location is considered a nondeductible commutation expense.
Note also: any personal errands, detours and side trips not directly related to business must be excluded from your mileage.
To stay within the rules, keep a log of each business trip and include:
It's a lot of work, but there are apps that can do it for you.
The federal tax code offers two ways to take your write-off for business use of your vehicle.
To calculate the expense, multiply your business miles logged by the standard IRS mileage rate. For the 2024 tax year it’s 67 cents, for 2025 70 cents. (The rate is adjusted annually to reflect current vehicle ownership and operation costs.)
| 🚦Important: don’t forget to add parking fees and tolls to your deduction, which the standard rate does not include. |
This method requires more detailed record-keeping but may result in a larger deduction, especially if the vehicle is heavily involved in your work (like a car service or delivery van). Here are some of the major expenses to track throughout the year:
Next, calculate the percentage of mileage your vehicle was used for business. Then apply that percentage to your total expenses to determine your deduction.
There are different ways to do this depending on your type of business:
Sole Proprietor: Use Part II, Line 9 on Schedule C to claim either your itemized vehicle expenses or standard mileage rate.
S Corporation: In this scenario, your company reimburses you for use of your personal car and claims the reimbursement as the write-off.
Partnership: Partners can claim mileage directly if unreimbursed by the firm; if you’re repaid, the partnership reports expenses on Schedule K-1.
MileIQ automatically tracks drives and classifies them as business or personal, helps you prepare for taxes, calculates the value of your rides for reimbursement, and complies with IRS requirements.
TripLog is an automated mileage tracker with a host of features to maximize tax deductions for self-employed and small business owners, including customizable expense reports, route planning and more.
Zoho Expense offers a user-friendly interface for tracking and managing business expenses with features that include a GPS tracker to log mileage and the ability of users to pin receipts to reports.
QuickBooks Self-Employed has a lot of the features mentioned above, including automatic mileage tracking, plus expense sorting, tax estimation and filing, integration with TurboTax, and much more.
Paper Logs This old standby “manual app” is low-tech but still popular and meets IRS compliance. You can find various types of logs and diaries at big box office supply outlets or your local stationery store.
Tracking your car, van or other motor vehicle’s business mileage can be a chore but can result in considerable tax savings.
The IRS has a standard per-mile deduction rate that can simplify this, but if you track actual vehicle expenses you may be able to deduct even more. A seasoned tax preparer can help you in these and other areas.
If you have any questions about this article, or any other tax or accounting needs to discuss, we’re always happy to help. Just click the button below to set up a free consultation: