What you need to know to ensure your allowable business, charitable and medical miles are not dismissed during an audit.
The tax code allows deductions for qualified miles driven for business, medical, moving and charitable purposes. But to claim this deduction you must keep adequate records of actual miles driven. During an audit this is an often disallowed deduction, despite the fact that you actually drove the distance claimed. How to make sure this doesn’t happen to you? Here are some tips.
- Keep a log. The tax code is clear on this point. You may not estimate your miles driven. You must support your claimed deduction, ideally with a detailed mileage log.
- Create good habits. Your odometer reading and miles driven should be noted as soon as possible after the event. Keep a log book in your car and note the miles each day. Logs created after the fact with estimated miles driven could be disallowed during an audit.
- Make thorough entries. Note the odometer readings, date, miles driven, the to/from locations, and the qualified purpose for the trip.
- Don’t lose out on the extras. The deduction for miles driven is meant to provide a deduction for fuel, depreciation, and repairs. You can also deduct out-of-pocket expenses for tolls, parking and other transportation fees. Keep a running total of these fees in the back of your mileage log.
- Keep separate logs for each deduction. Remember you may deduct mileage for business, charitable purposes, qualified moving and medical miles. It is best to keep track of each in a separate mileage log.
- Alternative business transportation deduction. When it comes to deducting business transportation expense, remember the miles driven method is not the only one available to you. You may also deduct your actual expenses, but how and when you make this determination is important. In the initial year of placing your auto into service for your business, it is best to keep track and record all your actual auto expenses. An analysis can then be conducted to see which method is best for you to maximize your deduction.