During your business day, as you are driving around in your personal vehicle, you may be wondering if you can receive any tax benefit from all the miles and expenses you are putting on it. As it stands with most tax-related questions, the answer is, “it depends.” While you can definitely take the expenses or mileage associated with the business use of the vehicle, you also need to understand both what constitutes “business use” and what records you need to keep to substantiate the use. You are allowed to take the expenses or mileage for any vehicle use getting from one workplace to another, going to a business meeting away from your regular workplace, or traveling from your home to a temporary workplace when you have one or more regular place of work. You cannot take any business expense for commuting (traveling from your home to your first workplace or from your last workplace to home.) One common misconception is that advertising displays automatically make your vehicle expenses/mileage deductible. However, putting display material on a vehicle that advertises the taxpayer’s business does not change the use of the vehicle from personal to business. Business use is still determined by the trip.
So what do you need to do to stay in compliance when you take a tax benefit for business mileage? These requirements are much the same as for meals and entertainment deductions. For any mileage deduction you wish to take for tax purposes, you must substantiate each trip with evidence that includes the following:
- The amount of the miles driven
- The location driven to or from
- The vehicle used
- The business purpose of the miles driven
The most effective and efficient way to record all of these requirements is to keep a log of your miles throughout the year. An estimate of miles driven or total accumulation of all trips will not hold up under an IRS inquiry, and your miles may be reduced or disallowed altogether. We have a mileage log available on our website here and under the “Resources” tab. You may use this log for your record-keeping or use it as a guide, but it will ensure that all the required substantiation has been met for the year. If you have any questions regarding mileage, or meals and entertainment expenses, don’t hesitate to get in touch with us!
-Heritage Accounting and Tax Services