It's quite easy to claim a business mileage tax deduction on your small business tax return. Whether you are an Etsy Seller, a blogger, a virtual assistant, or any number of things, most likely you are using your car on occasion for business purposes. That is your signal to calculate your business mileage tax deduction! Let me show you how.
What is business mileage?
Business mileage occurs when you drive your personal car for a business purpose. Examples might include, but are certainly not limited to:
- an Etsy seller driving to a craft store for supplies
- a blogger driving to a blogging conference
- a virtual assistant heading to the post office to mail contracts
Every single time you drive your personal vehicle for a business purpose you are logging business miles. Those business miles can add up to a tax deduction.
Some small business owners think they can charge gas purchases to their business when they use their car for a business purpose. This is not correct. Keep reading to learn how to correctly get a mileage deduction on your tax return.
How do you track business miles driven?
The IRS loves record keeping, and so their preferred method for tracking business miles is a log.
Track Miles with a Paper Log
Create your own simple mileage log and keep it in your car glove box or purse. The mileage log should include columns for:
- date
- beginning odometer
- ending odometer
- calculation of miles driven
- the business purpose of the trip
- misc cash expenditures for items such as tolls or parking meters
Or download the pretty mileage log I created for you! Get my simple mileage log for free, right now.
Track Miles with an App
If you are using QuickBooks Online for your small business bookkeeping, you already have access to a mileage tracker in their app. The QuickBooks mileage tracker will track each trip you make in your car, and you simply indicate which ones were personal and which ones were for business. At the end of the year you will already know your business miles driven for the year.
How do you calculate the tax deduction?
The IRS has made calculating your business mileage tax deduction surprisingly easy. Each year the IRS publishes the new standard mileage rate for automobiles driven for business. (The used the term automobile! 🙂 ) You simply multiply your business miles driven during the year times the rate and voila! you have your tax deduction! In recent years the mileage rate tends to be between 55 cents and 70 cents a mile.
For example, let's say you determine you drove 100 miles for business purposes and the standard mileage rate for the year in question was 70 cents a mile. Then 100 miles x .70 = $70.00 tax deduction.
Don't forget to add any cash payments for tolls or parking also recorded on your log, these are deductible too.
Where do you claim the deduction on your tax return?
As a small business owner you are most likely a sole proprietorship or a single member LLC, and so you will file Schedule C at the end of the year along with your 1040 tax return. You deduct your calculated business mileage deduction on Line 9 of Schedule C. Easy!
Don't forget to claim your business mileage tax deduction on this year's tax return!
