Tips for Tracking Mileage & Other Business Deductions
By Melissa Doran, CPA
Business Use of your Car
The IRS allows you to deduct expenses related to the use of your personal vehicle for business purposes. It can be a big tax deduction and can mean big tax savings for businesses especially for those paying self-employment tax. Whether you are deducting actual expenses or use standard mileage rates , you must still track your mileage. There are many ways you can track your mileage from paper logs, to spreadsheets, to apps on your phone but its important that your log will hold up to IRS scrutiny.
Your Mileage log should contain:
Date
Destination
Purpose
Beginning Odometer Reading
Ending Odometer Reading
Total Mileage
Any related trip expenses (ie, tolls, Parking, etc)
There are some great apps out there to simplify the tracking process.
Stride tax is a free app available on ios and android. It will record your mileage by running it in the background while you drive. You can also use it to log your receipts and business expense records.
Business Travel
If you travel to visit clients, attend trade shows, or for continuing education you may be able to deduct those expenses. In addition to deducting your mileage, you can also deduct the cost of your hotel, airfare, car rental, etc. Just be sure not to include any expenses associated with sightseeing or leisure. For audit purposes, be sure to keep a copy of your receipts, and maintain a calendar to document the date and purpose of the travel expense.
Business Meals and Entertainment
Taking your customers, vendors, and employees out is a great way to grow your business but deductions for these types of expenses are limited. For audit purposes, its important to keep a copy of your receipts. It also helps to maintain a calendar to document the date and purpose.
Deductible Meals and Entertainment Include:
Meals with clients – 50% Deductible
Meals with Co Workers if business is discussed – 50% Deductible
Meals while Traveling – 50% Deductible
Celebratory Meals (Holiday Parties, Birthdays, etc) – 100% Deductible
Business Related Entertainment Expenses no longer deductible. (This includes tickets to not-for-profit high school or college sporting events, leased skyboxes for sporting events, transportation to/from sporting events, cover charge, taxes, tips and parking for entertainment events)
Business Use of your Home
If you work from your home you may be able to take a home office deduction. To qualify you must have a specific area of your home designated for working only. The deduction is calculated based on the percentage of your home occupied by the office (Sq. ft of office space/Sq. fit of home) and there are two ways to calculate it.
1). The Regular Method allows you to deduct a percentage of your home expenses (Mortgage Interest, utilities, repairs, taxes, depreciation, etc.).
2) The Simplified Method will give you a $5 deduction per square foot of home used for business (maximum 300 sq. ft). While the simplified method is much easier to calculate, it is limited so it's important to look at both methods to see which one will get you the best deduction.
Other potentially deductible costs include:
Required work clothes or uniforms not appropriate for everyday use
Supplies and tools for use on the job
Work-related education.