When it comes to the tax law, there is no reasonableness test for mileage.
In fact, tax code Section 274 specifically discards the reasonableness standard and puts in its place strict substantiation rules.
To protect yourself and ensure that you aren’t missing out on any mileage-related deductions, it is recommended that a mileage log be kept for at least three consecutive months to prove your percentage of business miles versus personal miles. The three-month log concept comes from the IRS sample method described in its regulations.
You then apply this three-month percentage to either:
- your actual car expenses for the year, or
- your mileage for the year (assuming you deduct your vehicle using IRS mileage rates).
To make it easy on yourself, use a mileage log app. Here are a few of the top-rated apps for small businesses:
- MileIQ – For small businesses who want a budget-friendly, no frills app starting at $0 monthly.
- Hurdlr – For small businesses who want to automatically track mileage, expenses, income streams, and tax deductions in real-time.
- TripLog – Great for small businesses who need to track mileage for a sales team.
For more information about how your small business mileage can affect your tax return, contact our office at 732.566.3660.