When you use your vehicle for business, you have to keep track of your miles for the IRS for tax deductions. A car mileage tracker can take the form of a paper-based logbook, an Excel file used to record mileage – or – mileage log software, which provides the most time-efficient way of keeping a mileage log. In this article, we’ll cover just what you need to keep a presentable mileage log for the IRS, different business mileage tracker apps available in the market, and what mileage tracking apps can help you the most.
The IRS’s Mileage Log Requirements
There are a number of requirements and considerations to make when it comes to keeping a mileage log that meets all requirements for the IRS. Let’s examine some key aspects.
It is absolutely essential that you record your odometer at both the beginning and end of the year – this way you know exactly how much mileage needs to be accounted for. This is done most easily with a mileage log application – some of which offer the ability to create your logs retrospectively. This can be particularly life-saving if you’re facing an audit from the IRS and you have some understandable holes in your existing mileage log. To this day, many still keep record of their mileage through inefficient documentation methods, which often means that a few trips are missing. More on mileage recovery later.
Method of Calculation
There are two methods available for calculating tax deductions while driving your automobile for business reasons: the standard mileage rate and the actual expenses method. These methods differ greatly, with the former only offering tax deductions purely based on the miles you do, and the latter incorporating the entirety of the expenses associated with the operation of a vehicle. Of course, regardless of which method you use, a tax calculator can simplify the process further, and can even be found for free online.
Standard Mileage Rate
The standard business mileage rate for 2022 is 58.5 cents per mile. This means if you do 25,000 business miles in 2022, you’ll qualify for $14,625 in tax rebates. Watch out though – if your log has gaps in it or some of your claims are not logically possible, you could be fined a lot of money. Luckily, one of the best pieces of mileage tracking software reduces the chances of this happening to zero – again, more on the apps themselves soon.
Actual Expense Method
With the actual expense method, you’re not just using a business mileage tracker – you also need to keep copies of receipts which contain itemized amounts and that relate to the usage of your automobile. This can be an arduous and tedious process indeed – though if your vehicle costs are high enough, it can be worth it to choose this method over the more common standard mileage rate. Typically people who use the actual expenses method own and use expensive vehicles – the kind that require constant service.
All in all, claimable deductions include the following categories: oil/gas, insurance, depreciation, licenses, registration fees and tyres. For more information on this method – see the IRS’s website.
Business and Personal Miles
Another essential component of keeping a presentable mileage log for the IRS lies in differentiating business mileage from personal mileage. Since most people use the same vehicle for both aspects of their lives, logging both personal and business trips becomes an essential component of getting things done correctly.
Moreover, if there is anything less than 10% of your mileage logged as personal, the IRS will often examine you more closely, as below this number is considered an anomaly. The IRS doesn’t like anomalies – and they’re more and more likely to investigate them these days.
On a lighter note, it’s also good to know that any trips you make either to work or from work to your place of residence are not considered business trips – they fit into the category of ‘commuting’ and are therefore personal.
The Best Mileage Tracking Software
Now that we’ve taken the IRS as seriously as they indeed should be taken – let’s step back and take a look at the market. There are many pieces of mileage logging software, but choosing the right mileage app for yourself can be a daunting task.
First, we’re going to consider what’s on offer for free – then we can jump into a snapshot of the market – then later highlighting some important features that really help you stay on top of mileage deductions as a business person.
Using a Free Mileage Tracker
Using a free mileage tracker isn’t completely inadvisable – you could use an online mileage tracker for free, though you’re best off using an app that has a cloud-based web dashboard to go with the app itself; something you can access from your PC when it comes to finishing off your mileage logs.
The main issue with free mileage trackers is that they lack the features you need to get ahead – almost no free versions allow you to track your mileage automatically, and many big providers offer only a fixed number of trips. Sometimes, that’s a total of 40 “free drives” – as is the case for MileIQ, or – a maximum of 30 automatic trips per month per user, which is true for Everlance.
Another popular provider, Driversnote, offers just 20 trips per month, but many users comment that their interface and app is sleek and intuitive.
The only trial that allows one to try out the full product is one offered by MileageWise – a business mileage log app provider that has a slew of great features, some of which are not available elsewhere. The company extends an offer for a 14-day free trial, but the trial includes all their best features – this way you know what you’re getting before you lay down some real cash on an app for mileage.
An Overview of the Mileage Tracker Market
Since there are so many companies with great software out there, it’s best to take a look at what matters most: features. Features really are the name of the game when it comes to apps in general – and mileage calculator apps are no different. The below chart gives you some idea of just how much there is to choose from here, and – who actually backs up their words with what matters: the product.
The above graphic makes two things clear: there is a lot of competition in this market, and – its most popular players are not necessarily its best. We are here to conduct an objective analysis of this market, though MileageWise does stand out.
Next, we’re going to go over the most important features when it comes time to decide which mileage tracker app to go with, using examples where possible.
Most providers offer some form of auto-tracking, usually through vehicle movement monitoring. This system is efficient and usually reliable, but it is worth noting that MileageWise offers three automatic tracking methods – Bluetooth, Plug’N’Go, and standard vehicle movement monitoring. Having the freedom to choose which option suits you best is guaranteed to give you an advantage and save you time and money.
In-Built IRS Auditor
Worth highlighting, MileageWise’s in-built IRS auditor is especially useful – it goes through 70 logical contradictions that could occur in your mileage logs, making sure that everything is in perfect sync with your odometer when it comes time to print your logs. Sadly, no other providers seem to offer this feature currently.
Manual Trip Recording
While certainly a standard feature on almost every app – it is still worth giving attention to this feature if only also to mention that the ability to edit and change trips is also essential. If you choose an app that doesn’t have an in-built auditor then it becomes even more important, because you’re going to need to go through all those logs and correct the details yourself. Finally, recurring trips and trip sampling can be important – most providers offer these but a little research goes a long way.
Keeping a robust mileage log for taxes is paramount if you do business mileage with your vehicle. You need logs that satisfy the IRS’s needs, and you need them to be IRS-Proof too.
You need a mileage tracker app for small business owners, independent contractors, and freelancers that you can rely on, and, that can save you in a bind.
There are many to choose from, but depending on how important your business is to you – you might find yourself best served by MileageWise, MileIQ, Driversnote. MileageWise certainly has the edge on features – but there is a diverse range of great apps out there.
Do the research about the features and find out for yourself just which one might be the best for you.