Any mileage that was driven for Business purposes is eligible for either Mileage Deduction or Mileage Reimbursement. Depending on the status of their employment (Self-Employed vs. Employee) taxpayers might be eligible for them.
The higher the ratio of Business trips in a Mileage log, the higher Reimbursement or Deduction can be claimed after Business-related car expenses.
Reporting a 50% Business use compared to reporting a 90-100% Business Use can result in a difference of 6,000 USD / Year!
The 4 best practices to legally increase the ratio of the Business use of a Vehicle easily:
1. Turning Commuting miles into Business trips
As the IRS states: “If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business.”
In our experience, commuting to work accounts for more than 20% of the Business car use, and in fact, there are many cases where it is over 40%. Often a home address can be registered as the taxpayer’s main or regular place of Business if the claimant works from home as well.
2. Changes in customer visiting habits
By making the first and last stop of a day the closest Customer / Supplier / Business partner, the taxpayers will be able to deduct their commute as a Business expense as these trips have a Business purpose attached to them. This way the ratio of one’s Business trips can be drastically increased.
3. Little detours can be built into Business trips
To once again quote the IRS: “Minimal personal use, such as a stop for lunch on the way between two business stops, isn’t an interruption of business use.”
Personal stops can be incorporated into one Business trip without individually mentioning it in a Mileage log.
4. Combining Business purposes with Personal ones
Trips such as going Personal shopping can be combined with Business shopping. When going to pick up groceries taxpayers can buy the supplies they need in the office as well. This way they will be eligible to categorize it as a Business trip!
Tools to use for recording Mileage to prove the Business-Personal use ratio of a vehicle
Mileage tracker apps are very useful. From continuously tracked miles it is easy to generate monthly Mileage logs in IRS-compliant format.
For those who have not tracked their miles, or who do not have sufficient Mileage logs, there are software solutions available for retrospective mileage reconstruction, such as MileageWise, which focuses on producing IRS-Proof mileage logs.
Taxpayers who did not claim their past mileage on their Taxes can claim their Business miles for the previous 3 years retrospectively.
Source: MileageWise Inc.