How to Track Mileage for Taxes Effectively?

Mileage tracking is essential practice for many reasons, but it is critical if you are eager to claim tax deductions. Everyone who uses a personal vehicle for business-related purposes is eligible to get reimbursement from their employees based on the current rate. Sometimes, the methodology of reimbursing varies, and it depends on the personal preferences and mutual agreement of taxpayers(employers) and employees. Whatever the methodology can be, the one thing is common – proper mileage management/tracking. Genuine mileage data is a decisive factor for adequate calculation. So, as a recipient of tax deductions, your priority should be ensuring that the odometer shows correct data and you do the recordkeeping properly. The topic is appealing to employers in the same way. Hence, the correctness of the data is the subject of mutual concern.
In upcoming paragraphs, let’s discuss the topic profoundly, its importance and influence, common methods of tracking miles efficiently, rules of getting reimbursement based on the IRS rate, and how crucial it is to choose exactly the method that works for you if you want to get optimal tax deductions.

Why tracking mileage is crucial for tax deductions

Tracking mileage correctly is important because it allows you to claim the deduction and, therefore, get your non-taxable income. You are capable of claiming and maximizing your deduction if you are a self-employed individual or if you use a personal vehicle for work-related purposes. On the other hand, if you are a business owner/employer, you have to reimburse your employee based on the pre-determined plan, whether it is the IRS standard rate, Actual expense, or FAVR (fixed and variable rate). Apart from work-related purposes, the tax deduction is allowed for medical, moving, and charitable purposes.

Irs mileage rate and its impact

Getting the deductions based on the IRS rate is absolutely worthwhile: consider you travel 5000 miles for business purposes, as long as the IRS rate for 2024 is 67 cents, it means that you get $ 3 350 , reimbursement = Total miles X IRS mileage rate . IRS mileage rate for different purposes is variable. It changes from year to year. A number of factors, such as gas price, maintenance costs, vehicle cost, insurance, and inflation, influence the decision of the IRS every year. The rate has changed significantly in the last three years; the rate has jumped from 56 cents to 67 cents in 2021. The impact of the pandemic shutdown has become more obvious in the post-pandemic period. The issues of the supply chain caused increased maintenance, repair, and insurance prices; it also affected the cost of used automobiles because of the decreased amount of them.

IRS mileage rate 2024:

• Business: 67 cents
• Charity: 14 cents
• Medical or moving: 21 cents

What are common methods of tracking mileage?

Various methods of tracking mileage exist, including manual logbooks, digital spreadsheets, or apps that serve the same purpose but are more sophisticated. No matter which method is used, it’s more important that logs should include all the following details:

• Date of the trip
• The purpose of the trip
• Starting location/ending location
• Odometer reading (starting and ending)
• Total miles driven
• Additional information(if it exists)

Let’s see the characteristics of each method of record keeping in more detail.

Manual logbooks

Manual recordkeeping is a traditional way of keeping notes about mileage. In the digital era, it’s less appealing, however, there are people who feel more comfortable with manual note-taking. You can easily access a manual logbook online or buy it in the supply shops. Considering how much info needs to be hand-written at each stop, it is time-consuming. Additionally, human factor error probability is high when we are talking about manual notes. Hence, all of that leads to financial loss and inadequate tax returns. So, think twice before you pick this old-fashioned method nowadays. Anyway, the choice is yours.

Digital spreadsheets

Using digital spreadsheets is a more advanced way of note-taking. You can use any spreadsheet (Excel, pdf) you prefer. Keeping digital spreadsheets sounds more appealing than handwriting, and it will be efficient only when it is well-organized. Messy and badly organized sheets can be damaging and cluttered rather beneficial. According to the research, when using an Excel spreadsheet, there are cases of different types of errors. 88% of the spreadsheet contains errors. Causes are incorrect to use of formula and omitted data. Surely, it doesn’t indicate that you will be part of the negative statistics, but most of the time, no one is insured against it. A lack of technical knowledge can result in faulty logs.

Apps

Mileage Tracking apps are advanced solutions when it comes to simplicity and reliability. Unlike manual note-keeping, they are easy to use, comfortable, and less time-consuming. Although they are very effective solutions, we can weigh the benefits and drawbacks of such apps.
Benefits

1. Accuracy –precise data, reduced human error probability
2. Time-efficiency – there is no need for business people to spend their time on note-taking
3. Automotive – the data-collecting process is automated; you don’t need to remember something.
4. Convenience/comfort – some apps even categorize trips, whether personal or work-related.
5. Additional features—Some apps offer additional features such as reminders for vehicle maintenance, route optimization, etc.
6. Smartphone access—Mobile access promises comfort and convenience in the modern world. You can take control of the mileage from anywhere, anytime.

Drawbacks

1. Battery problems
2. Privacy issues
3. Technical issues
4. Price

Usually, Companies choose their tools for tracking mileage. For example, drivers of Doordash (a delivery company) know that their company uses an automatic mileage tracking system. The system uses GPS Technology, which tracks the distance traveled between each delivery and calculates the total mileage at the end of each shift. If someone doesn’t trust GPS technology completely, it is recommended to check it after every shift to make sure it is reliable.

How to track mileage for taxes and meet IRS Requirement?

If you want to meet IRS requirements and get mileage reimbursement, you should consider the following:

• It would help if you used your automobile for business purposes; you must not use more than 5 cars at the same time;
• Proper recordkeeping is crucial; Make sure that records are adequate to support your statement.
• It would help if you used the standard mileage rate in the first year the automobile is used for business use. After that, you can choose the standard mileage rate or actual expense method;
• If you use the actual expanse method, you should use the straight-line depreciation method, which is known as the Modified Accelerated Cost Recovery System (MACRS).
• Keep documentation: vehicle-related expense receipts, invoices, and vehicle records.
• Only business, medical, charitable, and moving trips are deductible. (keep in mind that commuting is not deductible)

Be mindful when you decide to use third-party tools for your vehicle, especially when you are using your automobile for business purposes and waiting for mileage deductions. For example, the Mileage blocker from Superkilometerfilter is an advanced tool widely used for testing purposes because of its flawless performance. Make sure to notify your employer that you use such devices, as not doing so may lead to misunderstandings. Moreover, you may have trouble meeting the IRS requirements.
In the following paragraph, we will discuss this unique device in detail.

The best mileage blocker with mobile application

The mileage blocker from Germany is an advanced tool that halts the mileage recording process from all control units. The best thing about the device is that it doesn’t cause flaws in the Can Bus system. Modified mileage stays untraceable unconditionally. The module is user-friendly; it comes with installation instructions and a mobile application. The mileage blocker is available for most models and brands, and you can purchase it from the official website.

The best mileage tracking app on the market

The SKF Speed app is a convenient tool for tracking speed and distance across various vehicles. Its user-friendly interface makes it a comfortable solution for many customers. Main features of the app are:

• Speed display: provides speed information using your iPhone GPS.
• Mileage tracking: logs distance traveled, has manual reset.
• Trip Summary: During any trip, you can view the total distance covered.
• Maintenance reminders: You can set reminders for maintenance tasks such as oil changes.
• Customization possibility: You can customize the app according to your personal preferences.

Turn Bluetooth on to access app features. Do not worry about data privacy; the data stays private and is stored on your phone.

Takeaway

Tracking mileage efficiency is crucial for managing your taxes and deductions. Proper management allows you to meet IRS requirements and get reimbursed effectively. So, never underestimate the importance of mileage tracking, whether you are an employed individual who uses a private vehicle for work-related travel or just an individual who wants to manage vehicle maintenance better.