It’s a common problem for business owners; not understanding the rules and regulations for vehicle expenses. But the tax experts at Broussard Poché, LLP want you to know, if your business is audited, the IRS will most likely ask for mileage logs if you deducted vehicle expenses. Knowing the rules can save you lots of time and money.
Actual vehicle expenses can be deducted, including depreciation, gas, maintenance, insurance and other vehicle operating costs. Or a business owner can use the standard mileage method. This allows a deduction based on the standard rate for each mile the vehicle is driven for business purposes. No matter which method you choose, recordkeeping is essential. Vehicle logs must provide the following information for each business trip: date, destination, business purpose, start odometer reading, stop odometer reading, and mileage. The IRS requires the logs be recorded at or near the time of the trip.
Exceptions to the Rules
Technically, every vehicle is subject to the rules. But the IRS permits specific exceptions for the following vehicles that are unlikely to have more than a minimum amount of personal use:
- Delivery trucks with seating only for the driver or only for the driver plus a folding jump seat.
- Buses with a 20-person minimum seating capacity.
- Special purpose farm vehicles.
- Any vehicle designed to carry cargo with a loaded gross vehicle weight over 14,000 pounds.
Complying with the IRS mileage recordkeeping rules can be tedious, especially for workers who drive significant distances for business purposes. Here are some ways you can simplify the process:
Use technology. Mileage logs don’t have to be kept in a written diary or day planner — you can download an app to your tablet or cell phone to track mileage.
Apply sampling methods. The IRS allows taxpayers to use the mileage for regular routes — for example if you visit the same customers on a fixed weekly schedule — and extrapolate the sample mileage over the entire tax year.
The IRS rarely allows exceptions for its strict rules on recordkeeping requirements for vehicles. Check with you tax adviser first or any of our professionals at Broussard Poché, LLP, we can help you navigate the complicated vehicle recordkeeping rules.