The new year just got here, so before you do anything else get outside and check your car’s odometer. This is the year we are all going to keep better track of our business miles! If you don’t already have a mileage diary, start one. Use the back of your favorite Christmas card. Your first entry is that number on your dashboard that you have to squint to read.
There are two ways to claim your mileage expense for your business: actual and standard. The standard mileage rate for for 2019 is $0.58 per mile. For 2020 the standard rate will be $0.575 per mile, a half cent decrease.
For years I have advised my clients that the standard rate was the way to go, especially if your auto use was occasional. For either method you need to track your miles, but for the actual expense method you need to also track your non-business miles, all your repair expenses and all your fuel expenses. We then need to allocate between business and personal. In addition, with the actual method we need to correctly calculate depreciation on your vehicle and track gains and losses when you sell your car.
There has been a change in the tax law regarding the sale of vehicles used in a business. I only learned about this at a conference in November, and I am still not exactly sure what it means. I need to do some more research and some more math.
But in the meantime, back to where we started. USE A MILEAGE LOG. START TODAY.
** A reminder: Your mileage log needs to include the date, starting point and destination, reason for trip, and total miles driven. This is what the IRS will ask for if your mileage expense is ever audited.
My log is part of my daily diary. The date is easy, I always start from my office, the destination is the client, my reason is always work, so I don’t even write anything down, and the total mileage never changes, so I have a post-it in the back of my notebook with all my regular trips. So, “Dec 9, Drake Conference, 12.2” is all I need.