As a business owner, there are a variety of deductions that you can consider. A popular one is the mileage deduction. The standard business mileage deduction for 2020 is 57.5 cents per mile. If you spend a lot of time on the road, it can add up in a big way. The easiest way to track this deduction is through an app like Mile IQ or QuickBooks mileage tracker (click here to learn more), which is built into the QuickBooks Online app.
For those who want to figure the deduction manually, this is what you need to do:
- On January 1, note the odometer reading on the car that you are driving for this deduction.
- Keep a written log for every trip you take for business purposes. This should include who you met with, the date, total miles and the purpose of the trip/meeting.
- On December 31st, again note the car’s mileage for the deduction.
Once you have created a tracking method, then you can develop a monthly and annual summary to determine how many miles you drove for business purposes. When tax time comes around, you can easily retrieve this annual amount and provide it to us at tax time.
To help you better understand how the deduction works, let me explain why the beginning and ending mileage is important. For most people, they use their car for personal and business purposes. The beginning and ending mileage help determine the mileage for each category. The IRS wants to know the miles you’ve driven for business purposes, divided by the total miles you drove that year. This calculates a percentage for business use. This percentage is then used to determine how much of the actual auto expenses are deductible. If the standard mileage rate gives you a greater deduction, then we will use that instead.
Please contact me at 317.852.7000 or by email at email@example.com if you have any questions about this popular deduction.