3 Ways to Track Your Mileage for Tax Purposes
I’ve mentioned before that being a self-employed music teacher allows you to take advantage of some pretty valuable tax perks that our employed counterparts don’t get. One of these is the mileage deduction.
Here’s how it works:
For every mile you drive for business (driving to lessons if you’re a travel teacher, teacher meetups, conferences, music stores, etc.), you can deduct a certain amount of money (the “Standard Mileage Rate) from your income.
This deduction lowers your taxable income and reduces the total amount of taxes you’ll have to pay. (Woot!)
Every year around December, the IRS releases its standard mileage rate for the upcoming year. For miles driven in 2017, the rate was 53.5 cents per mile. For miles driven in 2018, the rate is 54.5 cents per mile.
You do have to keep some detailed records in order to take this deduction, but it is worth it!
Here’s an overview of the systems I’ve tried. (Hint: If you drive a lot or already know you want an automated or completely digital system, skip to #3.)
1. Pen and Paper System
This is a simple, probably free, no-tech solution. Get a small notebook with lined paper and a pen. Make a promise to keep said pen with the notebook in the car at all times. Promise!
Once that pen gets lost the whole system breaks down. I suggest a pen with a clip or a spiral-bound notebook so you can keep the two together. Store the pen and notebook in you car’s glovebox or door pocket. (Maybe keep an extra pen in there, just in case?)
Every time you drive somewhere related to business, write down the following information:
- Purpose of the trip (Ex. “Lesson with Jacob” or “MTNA chapter meeting”)
- Starting odometer reading
- Ending odometer reading
- Total miles for the trip (to save you some calculations at tax time)
In college I had a house-painting business and I logged a LOT of business miles. This is the system I used. It worked, but took an immense amount of discipline to maintain and I know there were times I forgot to log trips because I was in a hurry.
The other downside was that, when it came time to do my taxes, I had to manually calculate the mileage from hundreds of trips or put everything into a spreadsheet to get a total. If you like data entry, this is the system for you, but I wasn’t such a big fan. 😉
Note: You’ll also need to know the total number of miles you drove in the year for non-business trips. The tax prep software I used asked for the odometer readings on the first and last days of the year, so I made a note in my calendar to snap a picture of the odometer every New Year and record it in my mileage log.
2. Calendar and Spreadsheet System
A few years back I was doing a lot of travel teaching. By this time, I had gone almost completely digital in the rest of my life, so I wanted a digital system for tracking mileage.
Instead of tracking every trip as I took it, I just made sure every travel lesson and business meeting was accurately recorded in my Google Calendar, along with the address of the appointment.
If a lesson was cancelled, I made note of that in the calendar event title so my calendar always reflected what actually happened. (I do this for non-travel lessons, too, just to keep things accurate.)
Then, every Friday afternoon I took a couple minutes to look through my calendar for the previous week’s trips. I logged those trips in a spreadsheet with the date, purpose of trip, location, and total mileage.
The majority of my business-related driving each week was to students’ homes, with a few piano teacher meetings or entrepreneurship events thrown in, so it was usually just a matter of copying and pasting the log from the previous week and changing the dates.
My lesson circuit was always the same number of miles, so that was easy. If I had attended a meeting somewhere I would just use Google Maps to calculate my route and enter that.
By doing this weekly, the trips were still fresh enough in my mind that if anything wasn’t recorded properly in my calendar I could catch and correct it. There’s no way I could have remembered if I had waited until the end of the year when I was preparing my taxes!
I am naturally meticulous about keeping my calendar up-to-date, so this system was pretty easy to maintain. It’s also free, assuming you have a phone/tablet/computer already, which might be a plus if you’re just starting out.
But I like a fully automated system, so this system only lasted a year before I upgraded again. 😊
3. Automated Systems
There are several mileage tracking apps out there, but MileIQ is consistently ranked among the top. It’s available for Android and iOS.
There’s a premium version, but the free one allows you to track up to 40 trips a month, which may be plenty if you’re not a travel teacher!
For the last couple of years, I’ve been using an Automatic car adapter to track mileage. It’s a device that plugs into the OBD port on your car and tracks your trips.
I chose the Automatic over MileIQ because it has a few other nerdy features that I like, but they might not mean anything to you. (Features like car engine light diagnostics and smart home integration.)
Both the Automatic and MileIQ apps let you generate reports of all the miles driven for business, making tax time a breeze!
Which system is the best?
As is true with so many tools and systems: the best one is the one you will actually use.
If you don’t get along with technology, use paper.
If you have a history of forgetting to track mileage, use an app.
If Big Brother makes you nervous, use a spreadsheet.
And if you want some riveting bedtime reading, check out all the gory details of mileage record-keeping in this IRS Publication.