Accurate mileage tracking is essential for anyone who drives for business purposes, especially if you plan to claim deductions on your taxes or reimburse employees for their business-related travel.
However, keeping a well-maintained mileage log can often feel tedious and time-consuming. That’s why adopting best practices for mileage tracking will not only ensure IRS compliance but also streamline the process, making it far more efficient.
In this guide, we’ll explore proven mileage log best practices that can help you improve your expense tracking process, ensure accuracy, and save time.
1. Use a Dedicated Mileage Tracking Tool
While traditional paper logs or spreadsheets can get the job done, a mileage tracking app like Everlance can automate much of the process, saving you significant time and reducing errors. Mileage tracking apps offer GPS technology to automatically record your trips, eliminating the need for manual entry.
Benefits of Mileage Tracking Apps:
Automatic trip detection: Many apps track trips in the background and log miles automatically.
Data synchronization: Mileage logs can be synced across devices, ensuring all your trips are saved.
Easy report generation: You can generate IRS-compliant mileage reports with a few clicks.
Apps such as Everlance can help you stay organized while minimizing effort, making it easier to manage your mileage logs.
2. Log Trips Daily to Avoid Errors
One of the most common mistakes people make is waiting too long to log their trips, leading to forgotten trips or inaccurate records. The best practice is to record your trips daily, or better yet, immediately after each trip. This ensures the details are still fresh in your mind, reducing the chances of making errors.
If you’re logging miles manually, be sure to document all the essential trip details, including:
- Date of the trip
- Start and end locations
- Purpose of the trip
- Mileage driven
By being consistent with daily logging, you’ll have a complete and accurate mileage log that’s ready for tax time.
3. Separate Business and Personal Mileage
Not all miles driven are deductible. The IRS allows deductions only for business-related mileage, meaning you must clearly separate your business trips from personal ones. This is important for both tax filings and ensuring your mileage reports reflect accurate business expenses.
How to Separate Business and Personal Trips:
Manual logging: Make sure to note whether each trip is for business or personal use.
Mileage tracking app: Many apps offer the ability to categorize trips as business or personal. Some apps even allow you to retroactively assign categories, making it easier to update logs.
By ensuring you only claim eligible business mileage, you’ll avoid potential issues with the IRS.
4. Capture All Necessary Trip Information
To meet IRS requirements, your mileage log should include specific details for each trip. These details serve as proof of your business miles and will be required if the IRS ever audits your deductions. Missing information could lead to denied deductions or penalties.
Here’s what your mileage log should include for every trip:
Date of the trip: Record the exact day you took the trip.
Start and end locations: Log both the starting point and the final destination.
Purpose of the trip: Clearly indicate how the trip relates to your business.
Mileage driven: Include odometer readings at the start and end of the trip, or the total miles driven.
Using a mileage tracker app can automatically capture this information, simplifying the process and ensuring no details are missed.
5. Regularly Review and Update Your Logs
Another essential best practice is to periodically review and update your mileage log. This ensures that your records remain accurate and comprehensive throughout the year. Many people wait until tax season to review their logs, only to discover missing trips or incomplete data.
Steps for Regular Log Reviews:
Monthly check-ins: Take time at the end of each month to go through your mileage log and verify all trips have been recorded.
Fill in missing information: If any entries are incomplete, now is the time to update them with the necessary details.
Organize by category: Ensure that each trip is correctly categorized as business or personal.
By staying on top of your logs, you’ll avoid scrambling to correct errors when tax deadlines approach.
6. Utilize Odometer Readings
To create a mileage log that’s 100% IRS-compliant, it’s a good idea to include odometer readings at the beginning and end of each trip. This method ensures that your mileage count is precise and verifiable.
Why Odometer Readings Are Useful:
Accuracy: By recording odometer readings, you’ll have an exact figure for miles driven, leaving no room for estimation errors.
Audit-proof: If you’re ever audited, providing odometer readings adds a layer of legitimacy to your mileage log.
If you’re using an app like Everlance, you can automatically track miles driven without having to manually record odometer readings. However, for manual logs, this extra step can strengthen the accuracy of your records.
7. Store Your Mileage Logs Securely
The IRS recommends keeping records related to business deductions, including mileage logs, for at least three years. In some cases, such as if you underreport your income, the IRS can look back even further. Storing your logs securely ensures you’re prepared if you need to provide evidence of your business miles during an audit.
Secure Storage Methods:
Cloud-based storage: Storing digital copies of your logs in cloud services like Google Drive or Dropbox ensures they won’t be lost and are accessible from any device.
Backup systems: Regularly back up your mileage logs, especially if you’re using a physical logbook or spreadsheet.
App data storage: Mileage tracking apps like Everlance typically store all your data securely in the cloud, making it easy to retrieve your logs whenever necessary.
By safeguarding your records, you’ll have peace of mind knowing they’re ready for tax filings or audits.
8. Maximize Your Deduction by Choosing the Right Method
There are two primary methods for claiming mileage deductions: the standard mileage rate and the actual expenses method. Choosing the best one for your business can help you maximize your deductions.
Standard Mileage Rate Method:
The standard mileage rate is a straightforward method where you multiply the number of business miles driven by the IRS mileage rate for the year. For 2024, the standard mileage rate is 65.5 cents per mile. This method is simpler and requires less documentation than the actual expenses method.
Actual Expenses Method:
With the actual expenses method, you deduct a percentage of your total vehicle-related expenses, including fuel, maintenance, and depreciation, based on the percentage of miles driven for business. This method can result in higher deductions if your vehicle expenses are substantial, but it requires more detailed record-keeping.
Best Practice:
If you’re not sure which method to use, consider calculating both at the end of the year to see which offers a higher deduction. Many tracking apps allow you to compare the two methods, making it easier to determine the best approach.
Conclusion: Simplify Your Mileage Log Process with Best Practices
Mileage tracking doesn’t have to be a hassle. By implementing these best practices, you can streamline your expense tracking process and stay compliant with IRS regulations. Whether you opt for a manual log or use a mileage tracker app like Everlance, staying consistent and organized is key to maximizing your deductions and saving time during tax season.
Start incorporating these best practices into your routine today, and you’ll never have to worry about missing out on valuable mileage deductions or facing issues with the IRS.
