Calculating Mileage for Business Use of Vehicles: What You Need to Know

Kortney Redick, CPA 

If you use your vehicle for business purposes, understanding how to properly calculate and substantiate your business mileage is essential for maximizing your tax deductions and staying compliant with IRS requirements. Continue reading to learn how mileage is calculated for business use, including where to record starting and ending mileage readings, and what records you need to keep.

What Counts as Business Mileage?

Business mileage includes the miles you drive your vehicle for business-related activities, such as:

• Traveling from your office to a client’s location

• Visiting customers or vendors

• Going to business meetings away from your regular workplace

• Traveling from your home to a temporary work location (if you have one or more regular work locations)

Commuting—the drive from your home to your regular place of work and back—is not considered business mileage and is not deductible. However, if you have a qualifying home office, trips from your home to other work locations in the same trade or business may be deductible.

How to Calculate Business Mileage

To calculate your business mileage, you need to track the miles driven for business purposes. This is typically done by recording the odometer readings at the start and end of each business trip. Here’s how:

1. At the Start of the Trip: Record the odometer reading before you begin your business-related drive.

2. At the End of the Trip: Record the odometer reading when you reach your business destination or return to your starting point.

3. Calculate the Miles Driven: Subtract the starting odometer reading from the ending reading to determine the miles driven for that trip.

Example:

• Odometer at start: 12,000 miles

• Odometer at end: 12,25 miles

• Business miles driven: 25 miles

Repeat this process for each business trip throughout the year.

What Records Do You Need to Keep?

The IRS requires you to keep contemporaneous records to substantiate your business mileage. According to IRS regulations, you must maintain an account book, diary, log, or similar record, along with documentary evidence, to establish each element of your mileage deduction.

Your mileage log should include:

• Date of each trip

• Starting location and destination (city, town, or area)

• Business purpose of the trip

• Starting and ending odometer readings

• Total miles driven for each trip

You can use a paper logbook, a spreadsheet, or a mileage tracking app, so long as the records are accurate and kept at or near the time of the trip.

Sampling: In some cases, if your business use is consistent, you may keep detailed records for a representative period (such as the first week of each month) and use that to substantiate your business use for the entire year, provided you can show that the sample period is representative of your typical mileage.

Why Are Odometer Readings Important?

Odometer readings at the beginning and end of each business trip provide objective evidence of the miles driven. The IRS places a high value on written, contemporaneous records. Inadequate or reconstructed records made long after the fact are less credible and may not be accepted in the event of an audit.

Important: Year-end mileage summaries or third-party reports (such as annual summaries from ride-sharing companies) are not sufficient by themselves. Courts have held that such summaries do not meet the substantiation requirements because they often lack the date, business purpose, and specific mileage for each trip.

What About Mixed-Use Vehicles?

If you use your vehicle for both business and personal purposes, you must allocate your expenses based on the percentage of business use. This is typically done by dividing your total business miles by the total miles driven during the year (as shown by your odometer readings at the start and end of the year).

Example:

• Total miles driven in the year: 20,000

• Business miles: 12,000

• Business use percentage: 60%

IRS Standard Mileage Rate

For 2024, the IRS standard mileage rate is 67 cents per business mile. You can use this rate to calculate your deduction instead of tracking actual expenses, but you must still keep detailed mileage records.

Key Takeaways

• Always record starting and ending odometer readings for each business trip.

• Keep a contemporaneous log with the date, destination, business purpose, and miles driven.

• Year-end summaries or estimates are not sufficient; detailed records are required.

• Allocate expenses based on the percentage of business use if the vehicle is used for both business and personal purposes.

• IRS standard mileage rate or actual expenses can be used but maintain proper documentation for either method.

By following these guidelines, you can ensure that your business mileage deductions are accurate, maximized, and fully substantiated in the event of an IRS audit. If you have questions about your specific situation, consult with a tax professional.