How Do I Keep Track of Mileage For Taxes?

Commuting and business miles might seem similar, but in the eyes of the IRS, they're two different concepts. Commuting miles are the ones you rack up driving to and from your workplace. Say you wake up, grab your coffee, hop in the car and head straight to your workplace. Those miles are commuting miles. Even if you swing by the dry cleaners or grab a breakfast burrito on the way, as long as you're headed to your usual work spot, it's all commuting. Business miles are the miles you drive for work-related stuff outside of your regular workplace. Think meetings with clients, trips to the bank for your business or running to grab supplies for a project. Remember, commuting miles aren't tax-deductible. The IRS won't give you a break for all those back-and-forth trips to your job. However, business miles are seen as a cost of doing business, so you can deduct them from your taxes. So, next time you're hitting the road, keep track of whether you're commuting or doing business. But what if you work from home? In that case, any trips you make from your home office to a workspace or client site are commuting miles. Say you're a freelance graphic designer and you zip over to a client's office to discuss a new project—those are commuting miles. If you decide to run some work-related errands before going home, those miles are business miles.

Every year, the IRS issues a new standard mileage deduction rate, and in 2024 it is $0.67. Using the standard mileage method, you can calculate your mileage expenses. The more you drive for business, the higher your costs get, which lets you take a larger deduction and lower self-employment taxes.

If you overestimate your tax write-offs without giving proper proof, the IRS can require you to pay a penalty. In the case of mileage tax deductions, they are usually for accuracy-related penalties. If your total mileage with proper proof is 5,000 miles for the year, but your actual mileage was 9,000, you can only claim a deduction for 5,000 because that's what you have proof for. If you file for deductions using 49,000 miles anyway, the IRS will issue a "Negligence or Disregard of the Rules or Regulations Penalty." According to the IRS, negligence or disregard happens when taxpayers carelessly, intentionally or recklessly ignore tax rules and regulations. The penalty for negligence is 20% of the underpayment amount and interest on the total amount for each month you delay the payment. Imagine you're a small business owner who's been logging your business-related mileage but haven’t paid much attention to the specific rules and regulations governing mileage deductions. You've been jotting down miles without proper documentation or justification, assuming it's all fine as long as it helps your bottom line. However, when the IRS decides to review your mileage deductions, they notice that many of your recorded miles don't align with the requirements outlined in the tax code. You've been a bit careless about keeping detailed records, and some of the trips you've claimed aren't considered legitimate business-related under IRS guidelines. As a result, the IRS hits you with the negligence or disregard of the rules or regulations penalty. This penalty could be a percentage of the underreported taxes based on inaccurate mileage claims, and it could add up to a significant amount.