It's critical to understand the rules around mileage deductions to maximize refunds on your tax bill.
Businesses, however, are prone to the most cumbersome mistakes that can leave previous dollars behind or even worse, put you up for an audit with the IRS. So we’ve combined a list of the most common mistakes people make so you’re well-informed to claim your deductions and make tax time a breeze.
Mistakes To Avoid When Claiming Tax Deductions For Mileage
Mistake #1: Being Unaware Of Mileage Deductions And Rules
When it comes to mileage deductions, the IRS has established numerous rules that you may not be aware of.
For instance, there are two methods for tracking mileage: the standard mileage rate method and the actual expenses method.
If you initially choose the standard mileage rate method for the first year your vehicle was in service, you can switch to the actual expenses method. But once you switch, you must continue using it for the rest of the vehicle’s life. However, if you start with the actual expenses method, you cannot switch to the standard mileage rate method later.
This is just one example of the complexities involved in mileage deductions. If you want to maximize deductions, it’s best to talk to your accountant and learn more about these rules at the beginning of the year.
To learn more about mileage reimbursements, IRS rates, and how to maximize your deductions, please refer to our comprehensive mileage reimbursement guide.
Mistake #2: Maintaining Poor Mileage Logs And Other Deductibles
Maintaining accurate and detailed mileage logs is crucial, especially during IRS audits. Manually keeping these logs can be tedious; without precise records, the IRS will deny deductions. Missing even a few days or weeks can accumulate over a year, leading to significant losses in potential deductions.
To strengthen your mileage deductions, include the date, miles driven, purpose, and receipts in your records. The more comprehensive the documentation, the better it is during audits.
People also guesstimate the actual miles driven and post-date entries. Please avoid that, as the IRS is an expert in identifying both. Doing so can trigger a more thorough audit, which can lead to delays or impact your deductions.
Using an IRS-compliant mileage log or a mileage tracking app like Fyle is the best approach. These tools automate the process, ensuring all records are accurate and up to date.
Mistake #3: Claiming Non-Deductible Mileage & 100% Business Usage
The IRS understands that not all travel an individual does is strictly for business. Personal trips, such as commuting to the office or visiting the doctor, do occur. Including these personal miles in your mileage log will result in their rejection by the IRS, disqualifying you from claiming those deductions.
You can learn about which miles count as business or commuting miles here.
Mistake #4: Reimbursing Mileage Above IRS Rates
The IRS has issued the standard mileage rate of $0.70 per mile driven for business use for the year 2025. Ensure you keep up with the changing rates yearly - the IRS issues it every December - and reimburse your employees at the correct rate. If you reimburse at a higher rate, it will be considered wages and taxed accordingly.
Mistake #5: Not Setting Up A Home Office
According to the IRS, you cannot claim deductions for commuting from home to work. But you can deduct business mileage if you set up a home office that qualifies as your regular workplace. By doing so, you can claim deductions for trips from your home office to a business location. The commute rule doesn't apply if you work at home, as you don't have to commute to work.
How To Avoid These Mistakes In Mileage Deductions
- Using a mileage tracking app to log all your miles digitally
To efficiently track business mileage, use a mileage tracking app such as Fyle. Simply enter your start location, any stops, and your destination, and Fyle will automatically calculate the distance and cost based on the mileage rates set by Finance. Powered by Google Maps, it ensures accurate tracking, saving you considerable time and effort by eliminating manual calculations.
- Keep all records and receipts of parking, tolls and other expenses
When claiming mileage deductions, you can also include relevant business expenses related to your business travels, such as gas, parking, tolls, and more. With tools like Fyle, you can simply take a picture of your receipt, and Fyle will automatically scan, store, and add it to your mileage report.
- Separate business and personal miles
With Fyle, you can track mileage exclusively for business-related trips. Additionally, you can set up recurring mileage for regular journeys and generate precise mileage reports for reimbursements.
Also Read:
Automate Mileage Tracking For Taxes
People lose thousands of dollars yearly due to inaccurate mileage deductions during tax season. To prevent this, it is crucial to understand why your mileage deductions could be denied and to learn the best practices recommended by the IRS. Consulting your accountant or tax professional at the beginning of the financial year is also advisable to stay updated on all IRS rules and regulations.
Using business mileage tracking software like Fyle can significantly reduce errors by providing accurate, audit-ready mileage reports. This helps ensure that you and your employees maintain precise records, minimizing the risk of costly mistakes.
