How do I track business mileage for tax purposes?

by | Jun 6, 2025 | Business Taxes, Vehicle & Mileage

Here’s what HIVE AI had to say about “How do I track business mileage for tax purposes?”:

Tracking business mileage for tax purposes requires meticulous record-keeping and adherence to strict substantiation requirements under Section 274(d) of the Internal Revenue Code. Proper documentation is essential regardless of whether you use the standard mileage rate or actual expense method for claiming vehicle deductions.

Fundamental Substantiation Requirements

The taxpayer will not be relieved of the requirement to substantiate the amount of each business use (i.e., the business mileage), or the time and business purpose of each use. Tresuary Reg. 1.274-5 This requirement applies whether you use the standard mileage rate or actual expenses method. A taxpayer who uses the standard mileage rate must still establish the actual business mileage, the time, and the business purpose of each use. Dawson U.S. Tax Court Opinions: Howard E. Steele & Tracy M. Steele

The specific elements you must substantiate for vehicle expenses include: the amount of business mileage for each business use of the automobile, (2) the total mileage (business and nonbusiness) of the automobile during the taxable year, (3) the date of each business use of the automobile, and (4) the business purpose of each business use of the automobile. Dawson U.S. Tax Court Opinions: Sam D. Kilpatrick

Required Documentation Methods

Adequate Records Standard

To meet the “adequate records” requirements of section 274(d) for vehicle expenses, a taxpayer choosing the mileage-rate option must maintain (1) an account book, a diary, a log, a statement of expense, trip sheets, or similar records, and (2) documentary evidence (such as receipts or bills), which, in combination, are sufficient to establish the required “elements”, including the mileage, the date, and the business purpose of each business use of the vehicle. Dawson U.S. Tax Court Opinions: Cari Barnes

To satisfy the adequate records standard, the taxpayer shall maintain an account book, a diary, a log, a statement of expense, trip sheets, or a similar record and other documentary evidence such as receipts. Dawson U.S. Tax Court Opinions: Robert G. Franklin & Marianne L. Franklin The key is that your records must be contemporaneous and detailed enough to establish all required elements.

What Your Mileage Log Must Include

Your mileage tracking system must capture specific information for each business trip. In order for Kilpatrick to substantiate his automobile expenses by adequate records, he must provide (1) an account book, log, or similar record and (2) documentary evidence (i.e., receipts, paid bills, or similar evidence) which, in combination, are sufficient to establish the following elements: the amount of mileage for each business use, the total amount of mileage (business and nonbusiness) during the taxable year, the date of each business use, and the business purpose of each business use. Dawson U.S. Tax Court Opinions: Sam D. Kilpatrick

Common Documentation Problems

The Tax Court has identified several common problems with mileage logs that result in disallowed deductions:

Insufficient Detail

First, the log notes only the number of miles driven each day and generally includes no information regarding where petitioner drove, the purpose of the trip, or his business relationship to the persons he visited. Dawson U.S. Tax Court Opinions: Robert G. Franklin & Marianne L. Franklin This type of incomplete record-keeping will not satisfy the substantiation requirements.

Including Non-Business Miles

Second, it appears that petitioner included in the mileage log the miles he drove commuting to and from Dawson U.S. Tax Court Opinions: Robert G. Franklin & Marianne L. Franklin work, which are personal expenses and not deductible. You must carefully separate business miles from personal and commuting miles.

Vague or Inaccurate Information

However, other entries in the complete logs contain errors such as vague descriptions of where petitioner husband drove and inaccurate distances. Dawson U.S. Tax Court Opinions: Howard E. Steele & Tracy M. Steele Additionally, In addition the complete logs include mileage for petitioner husband’s drives to Florida, which were not solely for a business purpose. Dawson U.S. Tax Court Opinions: Howard E. Steele & Tracy M. Steele Your records must be accurate and clearly distinguish business from personal travel.

Successful Documentation Examples

When proper records are maintained, the Tax Court will allow deductions. We conclude that petitioners have sufficiently substantiated that petitioner husband drove 7,739 and 3,481 miles for business in 2015 and 2016, respectively. As a result, petitioners may deduct vehicle expenses of $4,450 for 2015 and $1,880 for 2016. Dawson U.S. Tax Court Opinions: Howard E. Steele & Tracy M. Steele

In another successful case, entitled to deduct $4,777.85 for automobile expenses for driving 8,687 miles for his CPA business during 2009, i.e., 8,687 miles × 55 cents. Because Kilpatrick relies on the standard mileage rate to establish the amount of his automobile expenses for 2009, he is relieved of substantiating the amount of his actual expenses. Dawson U.S. Tax Court Opinions: Sam D. Kilpatrick

Calculating Business Use Percentage

When your vehicle serves both business and personal purposes, you must calculate the business use percentage. If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. You can divide your expenses based on the miles driven for each purpose. IRS – Publication 583: Starting a Business and Keeping Records

The IRS provides a clear example: You are the sole proprietor of a flower shop. You drove your van 20,000 miles during the year. 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. IRS – Publication 583: Starting a Business and Keeping Records

Special Situations

Change from Personal to Business Use

If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. In this case, you figure the percentage of business use for the year as follows. IRS – Publication 463: Travel, Gift, and Car Expenses

The calculation involves: Determine the percentage of business use for the period following the change. Do this by dividing business miles by total miles driven during that period. IRS – Publication 463: Travel, Gift, and Car Expenses Then Multiply the percentage in (1) by a fraction. The numerator (top number) is the number of months the car is used for business, and the denominator (bottom number) is 12. IRS – Publication 463: Travel, Gift, and Car Expenses

For example: You use a car only for personal purposes during the first 6 months of the year. During the last 6 months of the year, you drive the car a total of 15,000 —– you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Your business use for the year is 40% (80% (0.80) × [6]/12). IRS – Publication 463: Travel, Gift, and Car Expenses

Sampling Method

You can maintain an adequate record for portions of a tax year and use that record to support your business and investment use for the entire tax year if it can be shown by other evidence that the periods for which an adequate record is maintained are representative of use throughout the year. IRS – Publication 534: Depreciating Property Placed In Service Before 1987 This sampling method can be useful if your business use pattern is consistent throughout the year.

Lost Records

When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. IRS – Publication 534: Depreciating Property Placed In Service Before 1987

Standard Mileage Rate Considerations

Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. You can use the standard mileage rate for a vehicle you own or lease. The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. It is announced annually by the IRS. To figure your deduction, multiply your business miles by the standard mileage rate IRS – Publication 583: Starting a Business and Keeping Records

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. IRS Newsroom – IR-2022-124 – IRS increases mileage rate for remainder of 2022 However, you still must track your business mileage and substantiate the business purpose of each trip.

Reporting Requirements

On returns for taxable years beginning after December 31, 1984, taxpayers that claim a deduction or credit with respect to any vehicle are required to answer certain questions providing information about the use of the vehicle. The information required on the tax return relates to mileage (total, business, commuting, and other personal mileage), percentage of business use, date placed in service, use of other vehicles, after-work use, whether the taxpayer has evidence to support the business use claimed on the return, and whether or not the evidence is written. Tresuary Reg. 1.274-5T

Practical Recommendations for Effective Mileage Tracking

To ensure your mileage tracking meets IRS requirements:

Maintain Contemporaneous Records: Record your business trips as they occur, not weeks or months later. Use a dedicated mileage log, smartphone app, or vehicle tracking system.

Include Complete Information: For each business trip, record the date, starting and ending odometer readings (or total miles), destinations, and specific business purpose.

Separate Business from Personal: Clearly distinguish business miles from personal use, including commuting to your regular workplace.

Document Business Purpose: Be specific about why each trip was necessary for your business – meeting with clients, picking up supplies, traveling to job sites, etc.

Track Total Annual Mileage: Maintain records of your vehicle’s total mileage for the year to calculate the business use percentage.

Keep Supporting Documentation: Retain receipts, appointment calendars, and other documents that corroborate your business travel.

Use Consistent Methods: Whether you choose the standard mileage rate or actual expenses, apply your chosen method consistently throughout the tax year.

Remember that proper mileage tracking is not optional – it’s a legal requirement for claiming vehicle deductions. The IRS strictly enforces these substantiation requirements, and inadequate records will result in disallowed deductions regardless of whether your trips were legitimate business expenses.

Sources

Try Your AI Tax Assistant for Free!

Ready to transform your practice with agentic AI in tax? See firsthand how our cutting-edge AI tax tools can revolutionize your approach to tax research and planning.

Create Your Free Account