Tips on Claiming Travel Mileage When You’re Self-Employed

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Being a self-employed worker comes with its fair share of challenges.

You have no guaranteed income and it is likely that you don’t have a financial safety net in case things don’t work out.

With this in mind, every self-employed worker or entrepreneur should take full advantage of every tax deduction they can claim to reduce their tax burden.

Travel mileage is one of the tax deductions self-employed individuals can benefit from.

This kind of tax deduction applies to category 1099 workers (self-employed workers, small business owners, and freelancers).

What Is Tax Deductible?

You can claim mileage tax deductions for the driving expenses you incur when:

  • Traveling to meet clients.
  • Delivering products to customers.
  • Picking up business supplies.
  • Going to and from airports for business purposes.
  • Traveling from your office to temporary work sites.

However, you can’t claim mileage tax deductions for driving to and from your regular office or business location. No matter the distance, this commute is not tax-deductible.

You are also not allowed to include personal trips (such as driving to meet a friend) in your mileage tax deduction claim.

To claim a mileage tax deduction, the Internal Revenue Service (IRS) requires you to keep contemporaneous records of all your relevant driving expenses.

Simply put, this means the records should be created on the day of the drive or soon thereafter.

You will need to include details such as the purpose of the trip, distance covered, destination, and the date.

To get accurate details every time, a high-quality mileage tracker is a worthwhile investment.

Methods of Claiming Mileage Tax Deductions

There are two different ways that self-employed individuals can claim mileage tax deductions:

  • Standard mileage: This is where you multiply the miles driven for business by the standard rate (57.5 cents in 2020). The standard mileage includes related costs such as gas, repairs and maintenance, insurance, towing charges, license fees, and vehicle depreciation.
    You are, therefore, not allowed to deduct these expenses separately. Most people prefer this method as it is easy to calculate. With this method, you are allowed to have separate claims for tolls and parking fees.
  • Actual Car and Truck Expenses: With this method, you have to track all the relevant auto-related expenses for your business. This includes gas, repair and maintenance, license fees, insurance, towing charges, and vehicle depreciation.

This method requires careful record-keeping of all the relevant expenses. Because this can be quite difficult to do on your own, most people who opt for this method have to seek professional tax help.

Which Method Is Better?

Each method of calculating your mileage tax deduction has its pros and cons and they often produce greatly differing results.

On a given year, using the standard mileage might get you a larger deduction, while you might get a larger deduction on actual expenses in another year.

The Standard Mileage Method

The standard mileage is the better option if:

  • You’re looking for a simple, fuss-free method.
  • It is your first year of using your car for business. This will give you the flexibility to choose between the two methods in later years.

Generally, the standard mileage method offers a simple way to calculate the business usage of your vehicle.

You don’t have to keep track of all the individual purchases and save every receipt.

Instead, all you have to do is keep track of your mileage. You can do this very easily with a good mileage tracker.

Bonus Tip: Take a photo of your odometer reading at the beginning of the year and save it. Then take another odometer reading photo at the end of the year. Once you’ve calculated the percentage use of your car for business, you can easily calculate the mileage pertaining to business from the odometer readings.

For example, if you have determined that 50% of your car usage was for business, all you have to do is divide your total mileage by two, then multiply the figure by 57.5 (the standard mileage rate).

Actual Car and Truck Expenses Method

The actual car and truck expenses method is advisable for self-employed individuals who drive expensive vehicles.

This is because expensive vehicles often cost more in insurance, repair and maintenance, depreciation, and so on.

If you opt for the actual expenses method, you have to keep highly detailed contemporaneous records.

Keep track of all expenses (including the receipts) related to using your car for business.

Some of the most common expenses to include are:

  • Lease payments
  • Auto insurance
  • Gasoline
  • Maintenance (such as tire rotations, oil changes, replacing brake pads, etc.)
  • The cost of replacing tires
  • Title, licensing, and registration fees (however, this is not deductible in all states, so check with your local tax office or a professional)
  • Vehicle depreciation (calculate the total amount of your car’s depreciation and deduct only the percentage that applies to the business usage of the car)

Before filing your tax deduction claim, you can calculate to see which method will give you a larger deduction.

Using a Mileage Tracker

Ultimate Vehicle Mileage Tracker. Never stress about mileage tracking again!

If the IRS decides to audit your tax returns, they will want to see a log that details the dates, destinations, and purposes of your business trips.

You can record these details on paper but the easiest and most effective way to track your mileage expenses is by using a mileage tracker.

Don’t forget that you can also claim a deduction on the mileage tracker itself.

You won’t go wrong by opting for the GOFAR mileage tracker.

After plugging the GOFAR tracker’s adapter into your car’s diagnostic port, the car’s data will be sent to the GOFAR app on your smartphone.

You don’t need a technician to install the GOFAR mileage tracker in your car. Its installation is so simple that you can do it all by yourself.

GOFAR function illustration using a silver Toyota car
You also have the option to include GOFAR Ray, which records all the necessary details in cases where your smartphone malfunctions.

In addition to helping you record your mileage, here are a few more reasons to invest in a mileage tracker:

  • You can use a mileage tracker to log your fill-ups and track fuel spend, which helps you manage fuel consumption to increase your profit margins.
  • If you require employees to use a mileage tracker for business-related trips, this can help you spot and curb inefficient or deceitful practices.
    The GOFAR mileage tracker is equipped with automatic location tags that will discourage employees from lying about the locations they have visited for business. Your team will be more productive and you won’t lose money from reimbursing false expense claims.
  • GOFAR’s mileage tracker enables you to set speed limit alerts, which can help you avoid speeding fines, save on fuel, and get to your destination safely. This feature is especially useful for young drivers who are likely to over-speed.
  • An efficient mileage tracker also sends your car’s diagnostic data to the mobile app, giving you a look into your car’s efficiency, performance, and general health. This makes it easier to spot maintenance and repair issues so you can get them fixed before they become too costly.
  • The GOFAR mileage tracker will send you relevant reminders such as when to renew your insurance, when to update your car’s registration, and when your car is due for servicing. This can help you stay safe and avoid paying stiff fines.
  • GOFAR’s mileage tracker is able to monitor your car’s emissions and give you feedback to help you minimize your environmental impact.
  • The GOFAR mileage tracker enables you to check exactly when and where you parked. This can help you avoid expensive parking tickets.

Start Tracking Your Miles the Easy Way

Although you can use pen and paper to record your mileage or track the details on a spreadsheet, these methods are tedious and sometimes inaccurate.

These errors can end up costing you a significant amount of money in potential tax deductions.

The good news is that the GOFAR mileage tracker is compatible with over 42,000 car models. Therefore, you don’t have to worry about it not being compatible with your car!

Don’t wait any longer to start automatically tracking your mileage. Get your GOFAR mileage tracker today.

Track Work Mileage With GOFAR

  • Log, calculate and export business expenses at the press of a button
  • No cancellation fees
  • Available on iOS and Android

Get GOFAR now

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