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. Create your own simple mileage log and keep it in your car glove box or purse. The mileage log should include columns for:
- 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.
For those of you who want an app for everything, give MileIQ a test drive! It automatically tracks your drives, then you easily categorize each drive as business or personal. The free plan gives you 40 free drives a month. For those of you who drive frequently for business, with my referral link above you will get 20% off the annual subscription.
How do you calculate the tax deduction?
The IRS has made calculating your business mileage tax deduction surprisingly easy. Each year they publish standard mileage rates. You simply multiply your business miles driven during the year times the rate and voila! you have your tax deduction!
- The 2018 Standard Mileage rate for business is 54.5 cents per mile
- The 2019 Standard Mileage rate for business is 58 cents per mile
- The 2020 Standard Mileage rate for business is 57.5 cents per mile
- The 2021 Standard Mileage rate for business is 56 cents per mile
For example, let’s say you determine you drove 100 miles for business purposes in 2020. Then 100 miles x .575 = $57.50 tax deduction.
Don’t forget to add any cash payments for tolls or parking also recorded on your log, these are deductible too.
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As a small business owner, 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!