How to Track Mileage and Vehicle Expenses

Track business vehicle expenses using the standard mileage rate or actual expense method for maximum tax deductions.

1. Choose your deduction method. Pick either the standard mileage rate or actual expense method for each vehicle — you cannot switch between methods for the same vehicle once chosen. Standard mileage is simpler but actual expenses may yield higher deductions for expensive vehicles or high operating costs.
2. Set up a mileage tracking system. Record date, destination, business purpose, and miles driven for every business trip. Use a paper logbook, smartphone app, or GPS tracking device — the IRS requires contemporaneous records, not reconstructed logs.
3. Track actual expenses if using that method. Save receipts for gas, oil changes, repairs, insurance, registration, depreciation, and loan interest. Calculate the business-use percentage by dividing business miles by total miles driven annually.
4. Separate personal and business use. Only business miles qualify for deductions — commuting to your regular workplace does not count. Travel between job sites, client meetings, business errands, and temporary work locations all qualify as business miles.
5. Calculate your annual deduction. Multiply business miles by the standard rate, or multiply total actual expenses by your business-use percentage. For mixed-use vehicles, maintain precise records showing the business portion of total annual mileage.
6. Maintain audit-ready documentation. Keep mileage logs and expense receipts for at least three years after filing. Include odometer readings at year-end and document any changes in business use percentage year over year.