Self-Employed Worker Mileage Tax Deduction Guide

tax deductions for self employed and business owners

If you’re self-employed and use your vehicle for work, you can deduct many mileage expenses from your taxes. These deductions can include oil changes, maintenance, repairs, tire replacements, rotations, etc.

If you use a car solely for business, you have the right to deduct all expenses related to your work. If you use your personal car for business and personal activities, it’s a bit different. You can only use the expenses associated with conducting business when taking a deduction.

Depending on how much you drive, you could be saving thousands of dollars every year!

Self-Employed Mileage Guide: Get To Know the Laws and Regulations

It’s important for self-employed individuals to fully understand the rules and regulations regarding mileage deductions.

Related: Rideshare Tax Guide: What You Need To Know For 2024

Secondly, while the information within this article can act as a helpful guide, it should not be taken as advice from accounting or tax professionals. You should always review the IRS website for the most accurate and up-to-date information.

In addition, you should consider checking with a tax professional to ensure that you understand all possible requirements for taking tax deductions.

calculate mileage for self employed or business owners

Self-Employed Mileage Guide: Two Different Ways To Calculate Mileage Deductions

Self-employed individuals can use two different methods for calculating mileage expenses for tax deductions.

Related: How to Calculate Your Mileage for Taxes or Reimbursement

Standard Mileage Rate

If you choose to use this method, your calculations will be subject to IRS requirements. For example, as of January 2024, the standard mileage rate is 67 cents (or $0.67) per mile according to the IRS.

Actual Expenses

This is another method for self-employed people to claim deductions for business-related activities. With this method, you can list expenses like gas, repairs, insurance, maintenance, etc.

The IRS issues an updated list of what business owners and self-employed individuals can claim when using this method. You can use both methods, but it’s necessary to understand which rules should be applied to each method.

Choose the Method That’s Right for You

Keeping track of your trips and their length (in miles) is critical when using the standard mileage rate. Your deduction is based on how many miles you drive.

For those using actual expenses, keeping track of all expenses is required.

Self-Employed Mileage Guide: What To Do When You Own or Lease a Vehicle

To qualify for the standard IRS mileage rate, self-employed individuals or business owners must own or lease the vehicle(s) that they use for work. The criteria for ownership and leasing are a little different.

If You Own the Vehicle

If you have your own vehicle, then you must follow these requirements:

  • During your business’s first year of operation, you must use the standard IRS mileage rate. You can switch back and forth between the mileage rate method and the “actual expenses” method for all following years.
  • There can be no claimed depreciation deductions on the car, except by the straight-line method. The mileage rate already accounts for depreciation.
  • There can be no claim of a section 179 deduction (the vehicle’s special depreciation allowance).

Related: Top 5 Must-Know Tips For Independent Contractors

If You Lease Your Vehicle

Here are the regulations you must follow if you leased your vehicle:

  • You must use the standard mileage rate for deductions during your first year of operation.
  • For all subsequent years, you should use the standard mileage rate method during the entire period the vehicle is being leased, including renewals.
  • Simultaneously using five or more vehicles for the business (i.e., fleet operations) is not allowed. It is allowed if you switch between each vehicle.
self employed individual driving car

What Kinds of Vehicles Qualify for Mileage Deduction?

Cars, vans, pickups, panel trucks, etc., are vehicles that qualify for the self-employed mileage deduction.

Self-Employed Mileage Guide: How to Keep Track of Your Mileage

The IRS has some specific record-keeping requirements for mileage tax deductions. For all business-related mileage expenses, the IRS requires self-employed individuals and business owners to log the following:

  • mileage for each business use
  • total mileage for the year
  • time, place (your destination), and purpose

You’ll need to record your records at or near the time of the incurred expense. The IRS accepts methods like trip diaries, logs, Excel sheets, etc.

Related: Company Mileage Reimbursement Explained

If you are using a vehicle for both personal and business, your records should show the ratio as a percentage. This will include a log of all trips and a calculation of all the times you conducted business.

In the past, drivers have used outdated and time-consuming pen-and-paper mileage tracking methods. Today, mileage tracker apps make things significantly easier.

To make tracking your mileage for tax deductions easy, TripLog’s mileage tracker app provides a robust and sleek way for self-employed individuals and business owners to keep accurate and detailed records.

Self-Employed Mileage Guide: Calculating Tax Deductions for Business Usage

Determining what percentage of your vehicle use is business or personal is very important. This calculation isn’t too complex, but examples are always helpful. Let’s take a look:

  • Let’s say you have taken ten personal trips over the course of a month, with each trip equaling 20 miles. Total personal miles within that month would come to 200 (10 * 20 = 200).
  • Within the same month, say there were three business trips taken that totaled 100 miles.
  • When figuring how much you used your vehicle for business, you can divide your business miles by the total number of miles driven.
    • Take your 200 personal miles and your 100 business miles and add them up. Here, we get 300 total miles.
    • Divide your business miles (100) by your total miles (300). Thus, you have used your personal vehicle for 33% of your total use.
  • Multiply the number of business miles with the 2024 mileage rate of 67 cents.
  • This example shows that the business mileage expense for this month would equal $67.00 in (100 * 0.67).

Self-Employed Mileage Guide: Which Trips Qualify For IRS Tax Deductions?

There is no maximum for the number of miles you can claim for a deduction. Still, you should always keep in mind how many miles you drove for business purposes. There are various additional items to keep in mind while considering mileage deductions for business.

Related: Are You An Independent Contractor Or An Employee?

What Counts as Business Mileage?

  • Driving between two different places of work
  • Meeting with clients or customers
  • Running errands during the workday (picking up office supplies, etc.)

What Does NOT Count as Business Mileage?

  • Commuting to work from home
  • Carrying tools or other business items during a commute
  • Having advertising or company information displayed on your vehicle

Please visit the IRS website for additional information regarding working from home and related guidelines.

Self-employed Mileage Guide: Additional Expenses

Self-employed workers should consider that other expenses, such as parking fees, tolls, and related costs incurred when conducting business, often qualify for deductions. These costs do not qualify for deductions if you’re commuting to your place of work.

We built TripLog from the ground up to make saving money on your taxes easy. Download our app on iOS or Android, or schedule a complimentary live web demo today.

To learn more about our company mileage features, click here. Happy tracking!

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