Mileage: Are you leaving money on the table?

In the heat of tax time, I am repeatedly seeing entrepreneurs cheating themselves out of expenses for the mileage on their car.  I can just about mimic the words coming out of their mouths when I ask about their business miles: “I did not keep good records of that so I guess I will have to skip it for this year. I’ll try to keep up with that this year.”  The 2008 mileage rate is up to 50.5 cents per mile.&nbsp (Update: 2010 is 51 cents per mile, 2011 is 50 cents per mile); Do they realize that every 10 miles they drive could be saving them $3 or $4 in taxes?

One of the most daunting requirements for IRS substantiation of expenses is the one for automobile expenses.  Every time I am asked about what records are necessary, I can see the look of disappointment in the eyes of my clients.  Yes, you do need to keep a log showing the date, where you went, what the business purpose was for the trip and the number of miles driven.  I know it sounds tough, but resort back to the KISS principle (keep it simple stupid).  Do you already have a calendar that shows your appointments?  If so, start there.  Just add the miles to the information and you have a great start.  You will need to know the total miles and the total business miles for the year no matter what method you use for auto expenses.

Another common accounting issue is expensing the gas you put in the car.  There are several problems with this:

1.  How do you separate the gasoline expense for business miles versus personal miles?   Answer:  You can’t.

2.  What about the other costs of operating your vehicle like wear and tear, repairs, insurance, interest on your loan or the lease payment?  Answer:  It does not take these items into account.

If your vehicle is more than 50% used in business, you can use the actual expense method, but you only deduct a portion of the gas and other expenses to operate the car.  For the average driver, the standard mileage rate is more beneficial and much easier to track.

To make sure you get keep the most of your hard earned money, keep a mileage log and make sure you deduct the mileage and reimburse yourself for the business use at the standard mileage rate.  You can also consult IRS Publication 463 for all of the nitty gritty details.

Donna Bordeaux is a Certified Public Accountant and Personal Financial Specialist with Calculated Moves, PC in Lake Wylie, SC (a suburb of Charlotte, NC).  For further information about Donna or her firm, please visit