Keeping track of write-offs and other expenses is crucial to every business owner. This is because they are usually used as tax deductions. You may be excellent at monitoring employee payroll, inventory costs, office supplies, etc. But if mileage tracking is not part of your system, you may get into trouble.
Mileage tracking brings lots of benefits to your business. Check out the Android app here to help you gain tax rebates with mileage tracking.
This article will provide everything you need to know about mileage tracking and its importance to your business.
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What is mileage tracking?
Mileage tracking involves keeping an accurate mileage log for tax deductions or reimbursement. This implies that each mile you drive to meet up with clients, grab work supplies, or run business errands, adds up to cash which can be categorized under out-of-pocket expenses, which can be deducted from your taxes. You could also get reimbursement after you file your taxes.
A mileage tracker does not work like a GPS tracker for your business.
Actual expense method vs standard mileage rates
When tracking your mileage, you have two options: use the actual expense method or use standard mileage rates. Let’s analyze each of them.
The actual expense method of tracking your mileage is time-consuming and pretty challenging. This is because it usually involves tracking each detail of using your vehicle for your business. It usually includes:
- Oil changes
- Every other cost linked with driving
That is why most business owners prefer using the standard mileage rates. The standard mileage rates involve tracking the miles you have already driven. When you successfully determine this, the next step is multiplying it by the cost the IRS has already calculated.
The standard mileage rates method of mileage tracking is also time-consuming. A mileage tracker application helps you quickly and accurately track the miles you cover for work.
Why do you need to use a mileage tracker for your business?
Here are a few reasons why you need a mileage tracker:
● A mileage tracker helps you save money
Every business owner usually has a budget they stick to, which helps ensure every aspect of the business is running seamlessly. A mileage tracker will help save a lot of money for your business, especially when it has to do with your taxes.
The IRS currently allows self-employed workers to write off business miles. As a result, business miles are now worth 58 cents for every mile. This adds up pretty quickly if you drive consistently for work.
But W2 employers are not eligible for this due to the tax reform bill released in 2017.
● Using a mileage tracker minimizes the work you need to do
The stress of jotting down, keeping a list of expenses, and driving activities are much easier with a mileage tracker.
● A mileage tracker helps you keep up with the changing times
This fast-paced world is changing almost every minute, thanks to technological advancements that drive these changes. You may drive more and more, especially if the demand for the products you sell increases drastically. You may also need to show up physically for client meetings.
If your movement or travel increases, it becomes vital to get compensation for it instead of shouldering the entire expenses yourself.
Therefore, start tracking your mileage as this gives you more flexibility should some events happen and your traveling decrease or increase. In addition, this makes you more aware of how much you save per annum when you claim the miles done.
● Get more tax deductions
Any mile you drive for business, especially outside your regular commute, is tax-deductible, and you can claim it. Deductions generally bring down the amount of your taxable income, thereby minimizing tax liability.
Since the miles you drive for your business are tax deductible, a mileage tracker helps you log the miles you cover. You can submit these to the IRS to help lower your taxable income when the tax season comes around.
Every business needs a mileage tracker to save money and time. They also need it to manage their finances properly.
Therefore, if you have not put any mileage tracking system in place for your business, you should do so immediately. Start tracking all your expenses for your business as soon as possible. This is crucial even if you feel there may only be very few business trips.