Small Business Mileage Tracking

Small business mileage deductions

Small business owners and their employees are entitled to mileage reimbursements so long as they drive for business purposes. Business mileage is driving between two places of work. This can include but is not limited to visiting clients, driving out for supplies, and generally running business errands. Note that commuting from home to work is not considered business mileage.

As a small business owner, you can reimburse your employees for any work-related driving with their personal cars. The IRS sets a standard business mileage rate each year that you can use as a guideline. The mileage rate covers all expenses of owning and running employees’ vehicles for the business portion of their driving. See the 2023 standard mileage rate and the new 2024 IRS mileage rate.

It is standard practice for big and small businesses alike to reimburse employee mileage at the standard IRS rate, but you can choose to reimburse at a lower or higher cents per mile rate.

Keep in mind that if you reimburse employees at a higher rate than the IRS cents per mile, any amounts they receive over the standard will be taxed as income. However, if you don't reimburse employees, they will not be able to deduct their mileage expenses at tax time.

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Mileage log requirements for small business

In order to claim small business mileage deductions from the IRS, you must produce mileage records that are compliant with the tax authority’s requirements.

If you pay out mileage to your employees, you will need to keep their mileage logs as proof in case of future audits of your business.

A mileage log must contain the distance, time, destination and purpose of each business drive, as well as the total business mileage for the year. The IRS accepts different formats of mileage logs, including paper and digital files.

There are a few ways your small business can keep mileage records for deductions. You can do so manually, in the form of a paper logbook or a spreadsheet, or use a small business mileage tracker.

Choose a small business mileage tracker

Even the most organized business owners and employees can find manually documenting mileage and keeping it available for the tax authority for years on end tedious. Mileage trackers for small business can take care of everything for you and your employees, keep historical mileage logs at hand, and make reimbursements and deductions a breeze.

Mileage trackers are becoming increasingly used within small businesses due to their ability to simplify the recording of work-related mileage and help create IRS-compliant logs.

You can find many mileage tracking apps and software, but keep in mind some might be heavier and more expensive to use - they are more suitable for medium and big enterprises. A small business mileage tracker will be able to cover all of your needs and IRS requirements, and won’t financially burden your business. Here are some of the important features you should be looking for in a small business mileage tracker:

Automatically tracks mileage and records all the required by the IRS information.
Can generate IRS-compliant mileage logs.
Has online backup and mileage reports are always available in case of future tax audits.

There are lots of different options out there that we encourage you to explore. One option is the Driversnote app which comes with all essential features for a small business mileage tracker.

Tips for using a mileage tracker for small business

Start with the free mileage tracker - there is no need to pay before trying it out first. Start with a free version and see if it is right for you before committing.
Pick an app that offers automatic tracking - you do not want to have to log each trip manually.
Pick an app that offers a Teams option. With a Team option, you can approve your employees’ trips, quickly validate and review your team’s reimbursement and get an overview of your team’s status.
Pick an app with good ratings - good ratings mean happy users and less issues for you to deal with.
Pick a mileage tracking app available on both Android and iPhone - employees change phones and it is good to know that this won’t be an issue.
Pick a mileage tracking solution that offers great support - in case you ever encounter a problem, you want to know that someone will be there to help you out.

Check out our guide on IRS mileage deductions rules for the self-employed.

FAQ

Can a small business deduct gas or mileage on taxes?

The short answer is yes - small businesses can deduct business mileage from their taxes. By using the IRS standard mileage rate, you will be compensated for the costs of owning and operating your vehicle for each business mile.

How much mileage can you claim on taxes for a small business?

For the 2023 tax year, you can claim 65.5 cents per mile. For any business mileage throughout 2024, you will be able to claim 67 cents per mile. There is no limit to how much mileage a small business can claim, as long as the claim is for work-related miles only.

How do I record mileage information for small business taxes?

Keeping timely and accurate mileage records is a vital step in claiming mileage. Some of the most common ways for small businesses to record mileage are using a mileage tracker for small business, using a spreadsheet, or logging trips in a paper logbook.