Business Mileage: What Actually Substantiates a Deduction
Mileage is a commonly claimed and commonly disallowed deduction. What a contemporaneous log needs, commuting versus business miles, and standard vs actual.
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TLDR
Vehicle deductions rarely get lost because the driving was not for business. They get lost because the log does not exist, or someone wrote it later. A record needs four things: date, destination, business purpose and miles. Write them down contemporaneously: at or near the time of the trip. Commuting between home and your regular workplace is never deductible, no matter how far it is. A qualifying home office changes this, because trips from a principal place of business to other work locations count as business miles, not commuting. You generally pick one method, standard mileage or actual expenses. That first-year choice can limit your options in later years, so decide it on purpose.
Almost nobody loses a mileage deduction because the driving was not real business. They lose it because, eighteen months later, they cannot prove it happened.
That is a fixable problem. The rules themselves are not complicated.
#What a log actually has to contain
For each business trip, four elements:
- Date
- Destination, meaning where you went
- Business purpose, meaning who you saw or why you went
- Miles driven
Plus, for the year, you need your total miles and your beginning and ending odometer readings. You need total miles to figure your business share if you use actual expenses. You also report total, business and commuting miles on your return.
#Commuting is not business mileage
Here is the single most common error, and it has no exceptions: travel between your home and your regular place of work is personal. Distance does not matter. Taking calls on the way does not matter. Being self-employed does not matter.
Some things that are generally business miles:
- Travel between two work locations in the same day
- Travel to a client, customer or job site
- Travel to a temporary work location outside your metropolitan area
- Trips for business errands: the bank, supplies, the post office
A home office changes this, which is why the two topics belong together. If your home qualifies as your principal place of business, trips from there to other work locations become business travel, not commuting. That one fact can turn a lot of personal mileage into business mileage. That is why it pays to get the home office question right.
#Standard mileage or actual expenses
There are two methods. You generally pick one per vehicle.
| Standard mileage rate | Actual expenses | |
|---|---|---|
| How it works | Business miles × the IRS rate for that year | Actual costs × business-use percentage |
| What it covers | The standard rate covers gas, repairs, insurance and wear. You can still deduct business parking and tolls on top of it. You cannot use the standard rate on a car if you took a section 179 or bonus deduction on it. | Gas, repairs, insurance, registration, depreciation or lease, tires |
| Record keeping | Mileage log | Mileage log AND every receipt |
| Usually better for | High miles, inexpensive vehicle | Expensive vehicle, lower miles, high running costs |
Here is the row that surprises people: actual expenses still requires the mileage log. You need a business-use percentage to apply to your costs, and that percentage comes from the log. Choosing actual expenses does not free you from tracking miles. It adds receipts on top.
The first-year choice matters. Choosing actual expenses in year one can block you from using the standard rate on that vehicle later. Leasing has its own rules too. Decide this on purpose, not at filing time.
#If you have an S-corp
The mechanics are different here. Doing it the sole-proprietor way is a common error.
Say the vehicle is yours personally, and you use it for corporate business. The clean route is to reimburse yourself under an accountable plan. You submit the mileage. The corporation reimburses you at the standard rate. The reimbursement is deductible to the corporation, and it is not taxable income to you.
Without a proper accountable plan, reimbursements can end up treated as taxable compensation. That is worse than doing nothing. The setup is straightforward, and it needs to exist before you start reimbursing, not after.
Putting the vehicle in the company’s name is a separate decision with its own personal-use rules. It is not automatically better.
#Why this deduction draws attention
People claim vehicle expenses constantly. They are easy to overstate, and they are often unsupported. That combination makes them a natural thing for the IRS to ask about. The IRS can send you a letter asking you to prove your mileage. Have the log ready.
The good news: this is also one of the easiest deductions to defend if the log exists. There is no judgment call to argue about. Either the record is there, or it is not.
#What to do this week
- Install a mileage tracking app, or put a notebook in the car. Automatic is better because it survives your worst weeks.
- Record the odometer now, and again on December 31.
- Log the purpose, not just the destination. “Client meeting, Acme Corp” beats an address.
- Do it the same day. The whole value is in being contemporaneous.
- If you have an S-corp, confirm an accountable plan exists before reimbursing anything.
- Keep the log for at least 3 years after you file the return. Keep it longer if you are still writing off the vehicle.
#The short version
Four fields per trip, written at the time: date, destination, business purpose, miles. Plus your annual total and odometer readings. Commuting never counts. A qualifying home office can change a lot of what counts as commuting.
Pick standard or actual on purpose in year one. Remember that actual expenses still needs the log.
This deduction is real and worth real money. It is also the one most often lost to a record that was never kept. That is a bad way to lose a deduction you had a right to.