How to Track Mileage for Taxes
If you are a rideshare driver or food delivery courier, then you know your livelihood depends on your wheels. Whether you’re gassing up a car or recharging an e-bike, stacking up mileage comes with your job – and as it turns out, mileage is a tax-deductible expense that can help keep your taxes down.
Those who qualify for a mileage deduction have the extra responsibility of good record keeping throughout the year. While the task can be a little convoluting, there’s luckily a bunch of tools to help independent contractors stay on top of their game.
If you’ve been wondering how to track mileage for Doordash, Lyft, or any other gig platform, you’re not alone. We break down how you can calculate your mileage deductions to make filing taxes an easier process, along with highlighting some of the best mileage tracker apps to keep you organized!
Calculating Mileage Deductions
We have already outlined how to calculate mileage deductions for tax returns in our article about popular 1099 write-offs, but we’ll give you a quick refresher.
If you’re an independent contractor on a gig platform such as Uber or Grubhub, you are considered a self-employed business. This means that all business-related expenses, including mileage, can be accounted for during tax season. There are two deduction methods for you to decide on, but both will require you to keep a detailed record of your mileage related to your work.
The Standard Mileage Deduction
This deduction is a variable rate determined by the IRS each year. For 2021, the standard rate is 56 cents per mile. Using this deduction requires only that you keep a log of all qualifying mileage driven. The easiest way to calculate business-related mileage is to use a mileage tracking app every time you’re on the road. Making it a habit will ensure you don’t miss out on anything.
Vehicle Expense Deduction
As the name insinuates, this deduction requires filers to write off each qualifying business-related car expense including gas, maintenance, and insurance. If you are using this method, you’ll have to keep all of your receipts and other relevant documentation related to driving expenses. Each document should be dated, include the dollar amount, and description of purchased goods.
When using this method, you will have to calculate your allowable deduction to ensure you don’t include any personal usage. You can do this by dividing the miles you drive solely for business purposes by the total miles driven that year. For example, if 70 percent of your mileage is for business, then you can write off 70 percent of all car-related expenses.
No matter which method you choose, excellent bookkeeping is a must! You should be ready to provide any receipts as proof if, for whatever reason, the IRS decides to conduct an audit. Remember, all documentation must be kept for a minimum of three years so if you do need to show evidence, make a copy for yourself and file the original documents.
Tracking Your Mileage
There are really only two ways of how to track mileage for taxes. If you’re an old-fashioned guru of the pen and paper route, mileage can always be done in print. When recording your mileage, the IRS requires each log to hit each of these points:
- Starting point
- Endpoint (destination)
- Starting mileage
- Ending mileage
- Total miles driven
Don’t forget to record the odometer of your work vehicle before and after it’s used for business. That way when you’re calculating the total miles driven on any given day, you can subtract the final odometer reading from the initial odometer reading when you started work.
If you’re looking for a template, you can purchase a mileage logbook or use a spreadsheet to record each drive. Try to get one with space for other expenses such as tolls and tickets, as these also qualify as write-offs. If you do choose to log with this method, we’d recommend transferring to a digital platform for safekeeping.
Alternatively, you can use bookkeeping software or a comprehensive app to track mileage for work from the very start. For most people, this will be the better option and it’s one we highly recommend. These online mileage tracker apps use your phone’s GPS to keep tabs on each journey. They’re usually customizable and quite adaptable. Best of all, they remove the guesswork and errors of manual inputting.
Not sure where to start?
Our top pick: Gridwise provides an effortless way to track mileage and maximize your tax deductions. It offers several other gig-specific features so that you can make the most out of your time and money, optimizing when, where, and for who to drive for! Because of this, it’s one of the best rideshare mileage trackers on the market.
Here are several business mileage tracker apps you can also consider using while you’re on the road:
- Stride is one of the longest-running and most popular mileage apps. It has a user-friendly interface that is simple and easy to use. It’s completely free so you don’t have to worry about another expense for the books.
- MileIQ is another mileage app that offers simple categorization and syncs between all your devices. It is available in two versions – basic or unlimited. The basic version only allows 40 rides per month, so it’s an option to consider if you’re a part-time gig worker. If you are on the road for most of the week, then you would need to consider the unlimited option.
- Hurdlr is a mileage tracker app with exceptional transparency. It is built to ease the burden of tax filing and comes in three versions to suit your individual needs. The paid versions offer a real-time view of earnings and potential deductions, which can be really helpful if you want to take the stress out of bookkeeping.
Now that you know how to track mileage for taxes, you’re well on your way to being a pro at tracking your business expenses. For more financial and gig economy resources, be sure to sign up for our newsletter to stay up to date on the latest content!