Last year I drove 1546 miles for my business. I know this number because I kept track of it. Tracking mileage can be a tedious process and surely isn't anywhere near as exciting as helping a new mama. It is however very important when you are running your own business. Just like most tedious tasks, once they become habit they aren't so bad.
Now, my attorney husband suggests that I insert a disclaimer here: I am not a tax professional! Please speak with your own accountant about the details of your own tax situation. I am providing basic information that I believe will be helpful. Continue reading if you wish!
WHY TRACK MILEAGE?
Tracking mileage is very important when it comes to taxes. The US government (and Canada too I believe) allows you to deduct 55.5 cents (in the US in 2012) for every mile driven for business purposes. This means that a portion of your income won't be taxed. Yes...less taxes!!
HOW DOES IT WORK?
Here is a simple example (US Citizen)...
You drive 100 miles for business in a year.
100 (miles) x $0.555 (deductible amount per mile convert to dollars)= $55.50 (amount of your income not taxed)
The result is that you won't have to pay taxes on $55.50 of your income.
HOW DO I TRACK IT?
If you are going to deduct your mileage for tax purposes you really need to keep a log of your mileage. I have heard some doulas estimate it. NO! I really think this is a bad idea. If the IRS wants to audit you they will expect you to show a detailed record.
There are many methods to record mileage. They range from a pencil and pad kept in your car to an iPhone app. I use YourDoulaBiz to track my mileage. I often fill out my record before I go somewhere. For example, I make the prenatal appointment, use Google Maps to calculate the mileage and directions then create a task record.
We are working on adding a report to YourDoulaBiz which will display the year to date (YTD) totals for mileage and expense. A sample of the report along with sample data is displayed below. This information can be easily shared with your accountant at the end of the year.
[caption id="attachment_275" align="alignleft" width="551" caption="This is what the report available in YourDoulaBiz will look like. SAMPLE DATA DISPLAYED"]
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START NOW!
However you choose to track your mileage...start immediately! The sooner you have a system in place the better. I mentioned that I drove 1546 miles last year. That means that I wasn't taxed on $858. That is more that I charge for one client! Don't miss out on this type of savings.
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Rachel
January 31, 2017
This is a great reminder about tracking milage for tax purposes, however the IRS requires documentation of the actual miles traveled, not just the amount figured from Google Maps or similar. There are phone apps (tried one and wasn’t in love with it) and also booklets for tracking the actual mileage. I ended purchasing an inexpensive booklet that let’s me write down the starting mileage of a trip and the ending mileage and then the actual # of miles traveled and purpose. Once I started using the booklet I realized that Google Maps often over estimated the trip mileage.