small business deduction

Understanding Business Mileage

Business mileage is a simple way to get a tax deduction for businesses, including independent contractors. Claiming this deduction is as easy as keeping a record of business trips. The key to using business mileage to a company’s advantage is knowing what it is and what counts as business related. 

Business mileage is the miles someone drives between two business locations. It is completely independent of commuting. This is important because the IRS only recognizes mileage that’s business related for deduction purposes. A principle place of business must be determined for mileage calculation purposes. So, driving from your home to your office (principle place of business) qualifies as a commute, but when you leave the office to drive to a meeting at a client’s office, that trip would qualify as business mileage. 

There are many things that count as business mileage, but there are two main mileages; meeting a client and business operations. Meeting clients can be anywhere from going to their office or meeting them for lunch at a restaurant. Business operations are activities like going to the bank or going to buy office supplies. 

It is extremely important to remember to document all of the mileage to use it for a deduction. The deductible rate for business miles driven is 57.5 cents for 2015. The IRS can choose to not allow the mileage deduction if proper records aren’t kept. Proper records include total miles driven, dates of business trip, the destination and the purpose of the trip. If the trip is for meeting with a client or a run for supplies make sure to include the person you met with or the supplies you bought.