How to Calculate Mileage for Work Purposes

Understanding how to calculate mileage for work purposes is valuable for tax deductions or employer reimbursements. This information is relevant for self-employed individuals and employees using personal vehicles for work.

Determining Qualifiable Business Mileage

Defining “work mileage” is the first step. The Internal Revenue Service (IRS) distinguishes deductible business travel from non-deductible personal travel. Regular commuting between home and a primary workplace is generally not deductible.

However, mileage driven for business purposes often qualifies. This includes travel between two different workplaces, or from a primary workplace to a temporary location. Trips from a qualified home office to other work locations, such as client meetings or business errands, also qualify. Examples include driving to meet clients, visiting suppliers, attending business meetings, or for business-related education and conventions.

Methods for Documenting Mileage

Accurate documentation of business mileage is essential for tax purposes and employer reimbursements. A common method involves maintaining a manual mileage log. For each business trip, this log should include the date, starting and ending odometer readings, total miles driven, destination, and business purpose. Recording this information at or near the time of the trip is highly recommended for accuracy and compliance.

Many individuals now utilize smartphone mileage tracking applications. These apps often leverage GPS technology to automatically record trips, calculate mileage, and allow for easy categorization of business versus personal travel. These digital records must be as reliable as paper records and securely backed up. Some modern vehicles and fleet management systems incorporate built-in GPS or telematics capabilities that can track mileage, providing another avenue for detailed record-keeping.

Calculating the Monetary Value of Work Mileage

Once business mileage is accurately documented, its monetary value can be determined using one of two primary methods: the standard mileage rate or the actual expense method. The standard mileage rate is a per-mile rate established annually by the IRS. For 2025, this rate is 70 cents per mile for business use. This rate accounts for expenses such as gasoline, oil, maintenance, repairs, tires, insurance, and depreciation. Parking fees and tolls incurred for business purposes can be deducted separately, even when utilizing the standard mileage rate.

Alternatively, individuals can use the actual expense method, which involves tracking and deducting the real costs of operating the vehicle for business. This method allows for the inclusion of expenses like gas, oil, repairs, insurance, vehicle registration fees, and lease payments. Depreciation, a non-cash expense reflecting the vehicle’s wear and tear, can also be included.

To calculate the deductible amount, the total business miles are divided by the total miles driven, and this business-use percentage is then applied to the total vehicle expenses. A taxpayer generally must choose one method for a vehicle in the first year it is used for business. This initial choice can impact future options; for instance, if the standard mileage rate is chosen for an owned vehicle in the first year, a switch to the actual expense method is permissible in later years, though straight-line depreciation must then be used. However, if the actual expense method is chosen initially for an owned vehicle, a taxpayer cannot switch to the standard mileage rate for that specific vehicle in subsequent years. For leased vehicles, if the standard mileage rate is chosen, it must be used for the entire lease period, including any renewals.

Substantiating Mileage Records

Substantiating mileage records is crucial for tax audits or employer verification. The IRS requires specific details to support mileage claims. Each record should clearly state the date of travel, total mileage or expense amount, place of travel or destination, and business purpose. These records must be “contemporaneous,” meaning they are made at or near the time the expense is incurred.

Beyond the mileage log itself, retaining all supporting documentation is a prudent practice. This includes receipts for repairs, gas, tolls, and parking fees, especially if the actual expense method is being used. These records should be kept for a minimum of three years from the date the tax return was filed, or the due date of the return, whichever is later. Some tax professionals advise retaining records for up to six or seven years to account for extended audit periods in certain situations. Employer reimbursement requirements may differ, but the IRS imposes strict standards for tax deductions, emphasizing detailed and verifiable records.