FAQs About IRS Mileage Deductions 2021

Home » FAQs About IRS Mileage Deductions 2021

What Is the IRS Standard Mileage Rate in 2021?

If you choose to use the Standard Mileage Rate method of deduction set by US Government Agency, the Internal Revenue Service (IRS), you will use the following rates for deduction:

  • Business mileage at 56 cents per mile
  • Medical miles at 17 cents per mile
  • Charity miles at 14 cents per mile

Why Do You Need a Mileage Tracking App?

A mileage logging app is essential because of its efficiency and reliability.

It helps you to log your business mileage so that you can make a significant deduction during your tax file returns.

A mileage tracking app also helps you to avoid an inconvenient Internal Revenue Service audit.

One of the most reliable mileage logging apps is GOFAR.

The technology behind the app will find your car’s engine sweet spot and help you drive fuel efficiently.

It also helps you to track your mileage for tax deduction purposes. You will spend less on fuel, and you’ll get a huge tax deduction since you have sufficient evidence to prove your business mileage.

Other areas where the mileage app can help you include:

  • Finding fault in your car’s engine and notifying you of the same
  • Explaining engine malfunctions in plain English
  • Reminding you when to pay insurance
  • Connecting you with the best motor vehicle parts suppliers and mechanics (service currently available in Australia only)

What Are Examples of Tax Deductible Mileage?

The IRS allows you to deduct all the mileage that you have covered for business purposes. Although mileage deduction applies to workers under IRS tax form 1099, it’s important to point out that W-2 employees can also be eligible in some circumstances.

Examples of mileage that can be deducted for business purposes include:

  • Traveling to meet clients
  • Driving to pick up supplies
  • Meeting staff in offices other than the regular place of work
  • All the other drives that you make for business purposes

Which Drives Does the IRS Consider Business Drives?

  • Supply Runs – Any drive that you make that is business-related is considered a business drive and it is deductible. For example, if you make a supply run, visit a post office, and go to the bank, the mileage incurred will be tax deductible.
  • Driving to Business Luncheons and entertainment – If you drive to meet a client, or a vendor or a business colleague over lunch, this is regarded as a business drive. Also, if you entertain business colleagues, vendors, or clients during a restaurant happy hour, and you drive to the restaurant, that mileage is tax deductible.
  • Drive to and from the airport – The IRS considers travel to and from the airport as business travel and hence it is an allowable deduction. This is regardless of whether you drove to the airport from home or the office.
  • Drive to odd jobs – Sometimes workers combine their regular job with a side hustle such as lawn mowing, babysitting, Uber driving etc. You can deduct such miles from your taxes.
  • Visiting customers – When you drive from the office to a customer’s site, you are qualified to make the mileage deduction from your taxes. Note that this is NOT a drive from your home to a client site.
  • Driving between temporary job sites – Whenever you drive from home to a temporary job location, you qualify to log those miles for your tax deduction. According to the IRS, a job that lasts for less than one year is temporary.
  • Driving to seek for a job in the same industry – Whenever you drive from your home to look for work in the same industry as the previous job that you were engaged in, you are allowed to make deductions for the miles incurred.
travel expenses you can deduct
Source: IRS Publication 463 – Travel, Gift, and Car Expenses

What Will the IRS Require from the Mileage Log?

If you are using a mileage logging app, the IRS will require you to provide the following details:

  • Total miles covered by the vehicle
  • Total miles for business purposes
  • A list of all the places that you visited during a business trip
  • The objects for which you made those business trips

Never forget to include the total miles covered during the year as this will indicate to the IRS the total miles driven for business purposes and the total was driven for personal purposes.

Although the IRS will be satisfied by the contemporaneous records, always make sure that you have sufficient documents to prove your case for deducting the business miles against your tax.

The GOFAR mileage app provides you with all the documents that you will need to prove your case with the IRS.

It automatically tracks and logs your business mileage and then calculates your tax deduction for all the business trips that you make. It also keeps a proper record of miles driven for personal purposes.

Can I Claim Mileage on My Tax Return?

Claiming mileage on tax returns for self-employed workers is pretty straightforward.

Unfortunately, if you are a W-2 worker, you are only allowed to deduct mileage that you have itemised, and the said deduction adds up to more than 2% of your adjusted gross income.

IRS W-2 tax form
Source: IRS Tax Form W-2

What Is the Best Way to Track Mileage for Taxes?

First of all, if you are new to mileage deduction, you are well advised to use the Standard Mileage Rate method of deducting taxes. This is because the only record you are required to provide to the IRS is the total mileage for business.

If you opt to use the Actual Expenses method, you will have to keep a detailed record of ALL the expenses that you incur for running your car.

Secondly, since all you need for the Standard Mileage Rate method of deducting taxes is a mileage log, you will need an efficient and reliable mileage logging app.

The mileage tracking app will record what the IRS refers to as mileage log book or mileage log. The mileage log will act as the documentation to prove your case for deductions when you file the returns.

What’s the Difference between a Fuel Log and a Mileage Log?

Don’t confuse the fuel log with the mileage log. A fuel log is used to track the amount of fuel that you use on your car.

A mileage log is the record of all the business drives that you have made plus the personal mileage you have accumulated during a tax year.

The mileage log will be used for tax deduction purposes. It will also be the documentation that you will provide to the IRS when filing the returns.

What Documentation Does the IRS Accept for Mileage Deduction?

The IRS accepts different documentation as proof of mileage. Some of these documents include the mileage log book, the mileage sheets, the mileage log, and the mileage books.

The IRS also accepts the digital versions of these logs. Ensure that your digital documentation contains all the details that are needed by the Internal Revenue Service.

Remember that the digital mileage log is easier to store for up to five years.

A physical mileage log can be easily damaged, and you will be left without the documentation that you will need in case the IRS raises queries about your tax deductions.

That’s why it is highly recommended that you keep the evidence of your mileage for not less than five years and to use a trustworthy mileage tracking app.

Danny Adams sitting in a chair with a laptop

Danny Adams

Co-founder of GOFAR and with a Computer Science background from Harvard University, and a Bachelor of Aerospace, Aeronautical & Astronautical Engineering (Honours), UNSW. I want to transform data from cars into useful services so -> drivers save time & money -> emissions fall -> Australian roads are safer. So we built an ATO-compliant logbook app called GOFAR. I write to help you understand how to use GOFAR to maximise business travel. Reach out via support@gofar.co.

Related Posts

This content is provided for general information purposes only and does not constitute professional advice from GOFAR. We recommend consulting with an independent legal, taxation, or financial expert to ensure the information is applicable to your specific situation. Please note that relevant regulations and laws may evolve over time.
Check Car Buy Now