Deductions for business driving can be worth a lot. If you take the standard mileage deduction, you can deduct 54 cents (2016 rate) for every business mile you drive. If you use the actual expense method, you can deduct the cost of your gas, repairs, insurance and other expenses. Either way, you have to know how many business miles you drive during the year. The hardest way to track your mileage—and the way the IRS would like you to do it—is to keep track of every mile you drive every day, 52 weeks a year, using a mileage logbook or business diary. This means you’ll list every trip you take, whether for business, commuting, or personal reasons. If you enjoy record keeping, go ahead and use this method.
However, there is a much easier way: use a sampling method. Under this method, you keep track of your business mileage for a sample portion of the year and use your figures for that period to determine your business mileage for the whole year. This method assumes that you drive about the same amount for business throughout the year. To back up this assumption, you must scrupulously keep an appointment book showing your business appointments all year long. If you don’t want to keep an appointment book, don’t use the sampling method.
Your sample period must be at least 90 days—for example, the first three months of the year. Alternatively, you may sample one week each month—for example, the first week of every month. You don’t have to use the first three months of the year or the first week of every month; you could use any other three-month period or the second, third, or fourth week of every month. Use whatever works best—you want your sample period to be as representative as possible of the business travel you do throughout the year. You must keep track of the total miles you drove during the year by taking odometer readings on January 1 and December 31 and deducting any atypical mileage before applying your sample results.
Example: Tom, a traveling salesman, uses the sample method to compute his mileage, keeping track of his business miles for the first three months of the year. He drove 6,000 miles during that time and had 4,000 business miles. His business use percentage of his car was 67%. From his January 1 and December 31 odometer readings, Tom knows he drove a total of 27,000 miles during the year. However, Tom drove to the Grand Canyon for vacation, so he deducts this 1,000 mile trip from his total. This leaves him with 26,000 total miles for the year. To calculate his total business miles, he multiplies the year-long total by the business use percentage of his car: 67% × 26,000 = 17,420. Tom claims 17,420 business miles on his tax return.
To keep track of your business driving you can use either a paper mileage logbook that you keep in your car or an electronic application. Logbooks are available in any stationery store; while there are dozens of apps that you can use to record your mileage with an iPhone or similar device.