Accurate Tax Mileage Journals, Made Easy! (A New and Novel Approach, Using Technology)
Three Easy Steps to a Flawless Mileage Journal
As a business owner, I use two vehicles.
If I always remembered to swap the journal to the vehicle I was about to use (what business owner is able to remember such a task with thousands of other things on his or her mind?), there would be plenty of other reasons it would be impractical.
The journal would get smeared with Lexel caulk and tar, would get smashed by tools hastily thrown into the cab during a surprise shower, would get stolen by workers, would take a beating by someone needing a ride and tossing it in the back seat haphazardly, etc.
, etc.
I tried to keep a journal once, and I think it lasted about half a day before apparently disappearing from off the face of the earth! So what did I do in the past? I just way-underestimated my business mileage, to make sure I wasn't cheating the IRS.
Now that I'm keeping track of my mileage, I realize what a help it can be when tax-time comes.
A Realistically Workable Option - Take Pictures at the Pump! The method of journaling I'm about to share with you, while novel, is profoundly simple and excellently-adapted to the business owner or construction worker.
In brief, whenever you stop for gas, you get your phone out and snap three quick pictures - one of the price-per-gallon, one of the screen (showing your number of gallons and total price), and, getting back in the car/truck and starting it, one of the odometer (hold the phone close to get a good image of it).
Now, you may say, why do you need all that when you can just take the receipt? Did you already forget my first heading? (The receipts get caulk and tar on them, get used as make-shift notepads, blow out of the truck as you open the door, etc.
, etc.
).
Besides, with these pictures, you can have an impressive & useful journal,very easily.
Monthly Data Entry - Not Rocket Science This next step is about as easy as the last one - at least once you've gotten into the rhythm of it.
All you do is go through your phone at the end of each month, and plug your numbers into an Excel document.
Almost all phones have an option of viewing your pictures by month (or, "by event").
Search through from the beginning of the month to the end, and just grab five numbers from each fill-up "event.
" What I do is have 8 columns set up in Excel, the first five of which are simply entering data from the pictures; the last three are pre-created Excel formulas which do their work without me having to do a thing: 1.
Date of Fill-Up.
Your camera-phone should have the date of each picture.
2.
Price-per-Gallon.
3.
Cost-of-Fill-Up.
4.
Number of Gallons.
5.
Odometer Reading (While At the Pump).
6.
Period Mileage.
I.
e.
the odometer mileage difference between current and previous fill-ups (leave blank first time).
As an Excel function, just subtract the cell with odo-reading for previous fill-up from cell with odo-reading for current fill-up.
7.
Incremental Mileage.
I.
e.
adding up all the period mileages, to-date (leave blank first time).
8.
MPG.
Note that this will be more accurate the closer you get to filling up at near-empty and getting a full tank every single time you go to a gas-station.
A more accurate way to obtain MPG is to use the number of miles driven in an entire year divided by total number of gallons of gas bought in that year.
(Yes, my Prius really gets about 45MPG!) (Any yes, it's one of my two work vehicles!) Armed with this spreadsheet, you can do plenty.
For starters, you can find your monthly-total-miles-driven, segregated by vehicle, which will come in handy for tax computations.
By the way, if you use two or more vehicles for your business, why not create a separate "sheet" within your Excel document that can be devoted to each vehicle? This keeps things clear & tidy.
What else can you do with these figures? Lots.
You can review what the price of gas was over the year, whether you hit the gas stations at their lower fluctuating prices, how much you spend on gas in a year, what your actual cost of gas is for business use (say, if you wanted to figure a percentage of your income to give as a church offering, you would be able to deduct the actual costs for your vehicle, instead of the inflated IRS allowance), what your year-long MPG is, what months you do more-than-average driving, how large a percentage a long vacation added to personal mileage, etc.
, etc.
The possibilities your spreadsheet opens up are almost endless.
One last word here - make sure you take a picture of your odometer for all business vehicles on the morning of Jan.
1 of every year, and record that in your document.
It's critical to have that for your taxes as well as for a myriad of other computations you might like to find (year-long MPG, etc.
).
Use Google Earth to Accurately Calculate Personal Mileage! This one's a bit of a chore, but it can be enjoyable, and if you take this step (rather than try to roughly figure your personal mileage), you can have total peace-of-mind that you've got mileage "accounted for.
" What I do is, at the end of each day, if I have done any personal driving, I open up my Google Earth, zoom in to Auburn, AL, and retrace (with the "path" tool) any routes which were personal driving.
That might sound hard, but it probably takes 1 or 2 minutes.
Then, I just enter that into a pre-made calendar on a separate sheet of my same Excel document.
Most of my personal driving is done via my Prius, so that's the default; if I use my truck, I put a "T" beside that figure.
Pretty simple.
If you really want to impress the IRS, you can press your "Print Screen" button after you've drawn your path, paste it into a paint or Photoshop document, and save a low-res version into a folder, "Personal Mileage Screenshots for 2014.
" If you really want to go crazy, you can hyperlink your number in the calendar in Excel to that screenshot for ease of reference in the event of an audit! Again, at each month's end, you just take your TOTAL number of miles driven that month (for that vehicle), and subtract the PERSONAL miles (as obtained from your calendar via Google Earth) for that month, and voila!, you have your business miles EXACTLY for that month.
Maximizing Your Mileage Writeoff - The Hard Work Pays Off If you're a construction business-owner like me, you probably drive a lot more business miles than you thought.
I found that my truck's mileage was nearly 100% for business use, while my car was still about 75% for business use.
What that means for me is, I drive about 20,000 to 30,000 business miles per year, which, at 56.
5 cents/mile (2013 figure) is over $10,000 to $15,000 of writeoffs! But it gets even better.
If you can drive a fuel-efficient car (such as the Prius), you can really save up.
The Prius requires somewhere round-about 6.
5 cents/mile to buy its gas, which leaves me (sinse I primarily use my Prius) getting 50 cents-per-mile, or close to $10,000 of windfall tax writeoffs.
I think that's pretty nice! Now, the 56.
5 cents/mile deduction means that I cannot also write off things like oil-changes, replacing lights, vehicle repairs, depreciation, etc.
, but I still think its pretty nice! Here's an interesting tip.
If you need to go to the grocery store (let's say it's a bit of a drive - 15 miles), and you can think of something close by (or at the grocery store) that you need(ed) for business purposes, if the item is cheap (say, $4 or less), you might EARN a little money by buying it! Let me explain.
If you buy that item, you can consider that portion of the path of your trip (from and to home) as business mileage.
If you had to drive 30 miles round-trip, that's over $15 of written-off mileage that you wouldn't otherwise have been able to claim.
Now, a $15 tax deduction is at least equivalent to a $5 tax credit (depending on your tax bracket), which means you just got your item as a freebie AND got paid $1 for nothing.
You have MORE money in your bank account after having bought that business item! Pretty amazing.
Over time, such actions REALLY add up.
Entering Business Mileage in Your Tax Form Let's not forget the last step.
I'm not a tax-expert, but I'm pretty sure what I'm about to say is correct.
You will enter your deduction amount (total number of business miles in the year times $0.
565 [for tax year 2013]) into Line 9 of your Schedule C, which occurs under the Part II heading called "Expenses.
" You will show your computation of this figure either on Lines 43 through 47 of Schedule C, which occurs under the Part IV heading called "Information on Your Vehicle"; or, if you are required to fill out Form 4562 (or, if you have any items that you are depreciating and need to fill out Form 4562 anyway), then place your computations on Lines 24 through 41 of that document, which occurs under the Part V heading, called "Listed Property.
" If you're interested, there's also a smaller deduction for moving (24 cents/mile), medical (24 cents/mile), and charitable (14 cents/mile) mileage (these rates apply only for tax year 2013).
On Line 44 of Schedule C (if you're showing your computations in that easier-to-understand of the two documents), I'm pretty sure that "Business mileage" is the aggregate of all of the above (business@$0.
565/mile + moving@$0.
24/mile + medical@$0.
24/mile + charitable@$0.
14/mile); "Commuting" is non-applicable to a self-employed construction worker (at least if he has a home "office" that he uses) and would only refer to an employee as they drive TO and FROM work (THEIR commuting mileage is disallowed from being used in calculating the mileage deduction; but YOUR daily commute to and from various jobs IS allowed as BUSINESS mileage so DON'T list it under "Commuting"); and finally, "Other" means "personal mileage" (i.
e.
, driving to a grocery store, etc.
).
By the way, for tax purposes, if you are a single-member LLC, you still file Schedule C which says you are a sole-proprietor.
That might be confusing.
Understanding the Standard Mileage Deduction The IRS gives you two options for deducting your costs of business driving: 1.
Actual Expenses 2.
Standard Mileage Deduction *The "standard mileage deduction" for 2013 allows you to figure $0.
565 per business-mile-driven, which is fairly generous.
I think you'll come out better by choosing this.
The important thing to remember is, if you ever deduct your car/truck as "actual expenses," you're forever STUCK deducting it that way from then on (even more incentive to pick and stay with "standard mileage deduction")! Now, if you choose "standard mileage," you can't deduct the cost of vehicle repairs, oil-changes, etc.
, but you can deduct (business-related, surely?) "parking fees and tolls.
" *Again, if you are leasing (instead of owning) a vehicle, if you're wanting to do "standard mileage," you've got to do it from start-to-finish (the entire lease period) (also, you can't deduct lease payments).
(Nor can you deduct the cost of an owned vehicle, if you're going the "standard-mileage" way).
*Do your own math, and see which way you come out better, but I'm definitely recommending the "standard mileage" option! *One other disclaimer - if you used five or more vehicles in your business simultaneously (as in a fleet operation), you must use the "actual expenses" method.
*If I'm doing "standard mileage," what can I claim as business mileage? What counts and what doesn't? Well, pretty much anything business-related will count, except for going to get lunch for yourself or something personal like that.
As long as you are self-employed (and some people say, if you have an "office" in your home [such as computer room, garage of tools, barn of tools, etc.
]; some say if you count your house as your business [few smaller business owners have their own store-front office]), then you're good to go.
If you were an employee, all your commuting mileage would go down the drain.
If you're self-employed and meet those stipulations in the second-but-last sentence, then your commutes are now considered "business mileage," NOT "commuting miles.
"
- Take Three Quick Photos at the Gas Pump
- Every Evening, Record Any Personal Mileage
- Once a Month, Update Your Spreadsheet
As a business owner, I use two vehicles.
If I always remembered to swap the journal to the vehicle I was about to use (what business owner is able to remember such a task with thousands of other things on his or her mind?), there would be plenty of other reasons it would be impractical.
The journal would get smeared with Lexel caulk and tar, would get smashed by tools hastily thrown into the cab during a surprise shower, would get stolen by workers, would take a beating by someone needing a ride and tossing it in the back seat haphazardly, etc.
, etc.
I tried to keep a journal once, and I think it lasted about half a day before apparently disappearing from off the face of the earth! So what did I do in the past? I just way-underestimated my business mileage, to make sure I wasn't cheating the IRS.
Now that I'm keeping track of my mileage, I realize what a help it can be when tax-time comes.
A Realistically Workable Option - Take Pictures at the Pump! The method of journaling I'm about to share with you, while novel, is profoundly simple and excellently-adapted to the business owner or construction worker.
In brief, whenever you stop for gas, you get your phone out and snap three quick pictures - one of the price-per-gallon, one of the screen (showing your number of gallons and total price), and, getting back in the car/truck and starting it, one of the odometer (hold the phone close to get a good image of it).
Now, you may say, why do you need all that when you can just take the receipt? Did you already forget my first heading? (The receipts get caulk and tar on them, get used as make-shift notepads, blow out of the truck as you open the door, etc.
, etc.
).
Besides, with these pictures, you can have an impressive & useful journal,very easily.
Monthly Data Entry - Not Rocket Science This next step is about as easy as the last one - at least once you've gotten into the rhythm of it.
All you do is go through your phone at the end of each month, and plug your numbers into an Excel document.
Almost all phones have an option of viewing your pictures by month (or, "by event").
Search through from the beginning of the month to the end, and just grab five numbers from each fill-up "event.
" What I do is have 8 columns set up in Excel, the first five of which are simply entering data from the pictures; the last three are pre-created Excel formulas which do their work without me having to do a thing: 1.
Date of Fill-Up.
Your camera-phone should have the date of each picture.
2.
Price-per-Gallon.
3.
Cost-of-Fill-Up.
4.
Number of Gallons.
5.
Odometer Reading (While At the Pump).
6.
Period Mileage.
I.
e.
the odometer mileage difference between current and previous fill-ups (leave blank first time).
As an Excel function, just subtract the cell with odo-reading for previous fill-up from cell with odo-reading for current fill-up.
7.
Incremental Mileage.
I.
e.
adding up all the period mileages, to-date (leave blank first time).
8.
MPG.
Note that this will be more accurate the closer you get to filling up at near-empty and getting a full tank every single time you go to a gas-station.
A more accurate way to obtain MPG is to use the number of miles driven in an entire year divided by total number of gallons of gas bought in that year.
(Yes, my Prius really gets about 45MPG!) (Any yes, it's one of my two work vehicles!) Armed with this spreadsheet, you can do plenty.
For starters, you can find your monthly-total-miles-driven, segregated by vehicle, which will come in handy for tax computations.
By the way, if you use two or more vehicles for your business, why not create a separate "sheet" within your Excel document that can be devoted to each vehicle? This keeps things clear & tidy.
What else can you do with these figures? Lots.
You can review what the price of gas was over the year, whether you hit the gas stations at their lower fluctuating prices, how much you spend on gas in a year, what your actual cost of gas is for business use (say, if you wanted to figure a percentage of your income to give as a church offering, you would be able to deduct the actual costs for your vehicle, instead of the inflated IRS allowance), what your year-long MPG is, what months you do more-than-average driving, how large a percentage a long vacation added to personal mileage, etc.
, etc.
The possibilities your spreadsheet opens up are almost endless.
One last word here - make sure you take a picture of your odometer for all business vehicles on the morning of Jan.
1 of every year, and record that in your document.
It's critical to have that for your taxes as well as for a myriad of other computations you might like to find (year-long MPG, etc.
).
Use Google Earth to Accurately Calculate Personal Mileage! This one's a bit of a chore, but it can be enjoyable, and if you take this step (rather than try to roughly figure your personal mileage), you can have total peace-of-mind that you've got mileage "accounted for.
" What I do is, at the end of each day, if I have done any personal driving, I open up my Google Earth, zoom in to Auburn, AL, and retrace (with the "path" tool) any routes which were personal driving.
That might sound hard, but it probably takes 1 or 2 minutes.
Then, I just enter that into a pre-made calendar on a separate sheet of my same Excel document.
Most of my personal driving is done via my Prius, so that's the default; if I use my truck, I put a "T" beside that figure.
Pretty simple.
If you really want to impress the IRS, you can press your "Print Screen" button after you've drawn your path, paste it into a paint or Photoshop document, and save a low-res version into a folder, "Personal Mileage Screenshots for 2014.
" If you really want to go crazy, you can hyperlink your number in the calendar in Excel to that screenshot for ease of reference in the event of an audit! Again, at each month's end, you just take your TOTAL number of miles driven that month (for that vehicle), and subtract the PERSONAL miles (as obtained from your calendar via Google Earth) for that month, and voila!, you have your business miles EXACTLY for that month.
Maximizing Your Mileage Writeoff - The Hard Work Pays Off If you're a construction business-owner like me, you probably drive a lot more business miles than you thought.
I found that my truck's mileage was nearly 100% for business use, while my car was still about 75% for business use.
What that means for me is, I drive about 20,000 to 30,000 business miles per year, which, at 56.
5 cents/mile (2013 figure) is over $10,000 to $15,000 of writeoffs! But it gets even better.
If you can drive a fuel-efficient car (such as the Prius), you can really save up.
The Prius requires somewhere round-about 6.
5 cents/mile to buy its gas, which leaves me (sinse I primarily use my Prius) getting 50 cents-per-mile, or close to $10,000 of windfall tax writeoffs.
I think that's pretty nice! Now, the 56.
5 cents/mile deduction means that I cannot also write off things like oil-changes, replacing lights, vehicle repairs, depreciation, etc.
, but I still think its pretty nice! Here's an interesting tip.
If you need to go to the grocery store (let's say it's a bit of a drive - 15 miles), and you can think of something close by (or at the grocery store) that you need(ed) for business purposes, if the item is cheap (say, $4 or less), you might EARN a little money by buying it! Let me explain.
If you buy that item, you can consider that portion of the path of your trip (from and to home) as business mileage.
If you had to drive 30 miles round-trip, that's over $15 of written-off mileage that you wouldn't otherwise have been able to claim.
Now, a $15 tax deduction is at least equivalent to a $5 tax credit (depending on your tax bracket), which means you just got your item as a freebie AND got paid $1 for nothing.
You have MORE money in your bank account after having bought that business item! Pretty amazing.
Over time, such actions REALLY add up.
Entering Business Mileage in Your Tax Form Let's not forget the last step.
I'm not a tax-expert, but I'm pretty sure what I'm about to say is correct.
You will enter your deduction amount (total number of business miles in the year times $0.
565 [for tax year 2013]) into Line 9 of your Schedule C, which occurs under the Part II heading called "Expenses.
" You will show your computation of this figure either on Lines 43 through 47 of Schedule C, which occurs under the Part IV heading called "Information on Your Vehicle"; or, if you are required to fill out Form 4562 (or, if you have any items that you are depreciating and need to fill out Form 4562 anyway), then place your computations on Lines 24 through 41 of that document, which occurs under the Part V heading, called "Listed Property.
" If you're interested, there's also a smaller deduction for moving (24 cents/mile), medical (24 cents/mile), and charitable (14 cents/mile) mileage (these rates apply only for tax year 2013).
On Line 44 of Schedule C (if you're showing your computations in that easier-to-understand of the two documents), I'm pretty sure that "Business mileage" is the aggregate of all of the above (business@$0.
565/mile + moving@$0.
24/mile + medical@$0.
24/mile + charitable@$0.
14/mile); "Commuting" is non-applicable to a self-employed construction worker (at least if he has a home "office" that he uses) and would only refer to an employee as they drive TO and FROM work (THEIR commuting mileage is disallowed from being used in calculating the mileage deduction; but YOUR daily commute to and from various jobs IS allowed as BUSINESS mileage so DON'T list it under "Commuting"); and finally, "Other" means "personal mileage" (i.
e.
, driving to a grocery store, etc.
).
By the way, for tax purposes, if you are a single-member LLC, you still file Schedule C which says you are a sole-proprietor.
That might be confusing.
Understanding the Standard Mileage Deduction The IRS gives you two options for deducting your costs of business driving: 1.
Actual Expenses 2.
Standard Mileage Deduction *The "standard mileage deduction" for 2013 allows you to figure $0.
565 per business-mile-driven, which is fairly generous.
I think you'll come out better by choosing this.
The important thing to remember is, if you ever deduct your car/truck as "actual expenses," you're forever STUCK deducting it that way from then on (even more incentive to pick and stay with "standard mileage deduction")! Now, if you choose "standard mileage," you can't deduct the cost of vehicle repairs, oil-changes, etc.
, but you can deduct (business-related, surely?) "parking fees and tolls.
" *Again, if you are leasing (instead of owning) a vehicle, if you're wanting to do "standard mileage," you've got to do it from start-to-finish (the entire lease period) (also, you can't deduct lease payments).
(Nor can you deduct the cost of an owned vehicle, if you're going the "standard-mileage" way).
*Do your own math, and see which way you come out better, but I'm definitely recommending the "standard mileage" option! *One other disclaimer - if you used five or more vehicles in your business simultaneously (as in a fleet operation), you must use the "actual expenses" method.
*If I'm doing "standard mileage," what can I claim as business mileage? What counts and what doesn't? Well, pretty much anything business-related will count, except for going to get lunch for yourself or something personal like that.
As long as you are self-employed (and some people say, if you have an "office" in your home [such as computer room, garage of tools, barn of tools, etc.
]; some say if you count your house as your business [few smaller business owners have their own store-front office]), then you're good to go.
If you were an employee, all your commuting mileage would go down the drain.
If you're self-employed and meet those stipulations in the second-but-last sentence, then your commutes are now considered "business mileage," NOT "commuting miles.
"
Source...