top of page
Search

Managing Auto Expenses and Tracking Mileage

If you’re a business owner, you might already be familiar with the idea of mileage tracking. No one likes to do it, but in order to deduct an auto expense, you must track your business mileage. The business-related auto and mileage expense is an important tax deduction. When you own and manage rental properties, you also need to track mileage. Assuming you don’t live next door to your property, it is likely that you spend time traveling to your property, Home Depot, and more.


Business and rental-related mileage and travel expenses are deductible if they are “ordinary and necessary” to the business. For a landlord, an appropriate mileage expense example might include traveling to your rental property to deal with tenants, maintenance, or repairs and NOT taking a longer route to/from work every day to drive past your rental property. Other examples of appropriate mileage/travel expenses might include:


  • Traveling to property to show potential tenants

  • Traveling to the hardware store to purchase supplies used in property maintenance/renovations

  • Travel to meet with contractors, attorneys, accountants, other professionals involved in rental property

How should you track your mileage and travel expenses?

We’ve established the importance of adhering to IRS guidelines around travel expenses, but what is the best way to go about this? When it comes to actually tracking mileage, we recommend utilizing something like Landlord Studio - which has a mileage tracker built into their software. Other accounting software, such as QuickBooks or Xero offer similar mileage tracking and of course, there are stand-alone applications as well. If all else fails, you can keep a notebook in your car and manually jot down business-related mileage.


With whatever method you choose it’s important to document the business purpose, date, amount of miles, and location of your trip. The use of an automatic mileage tracker (i.e., Landlord Studio or QBO) makes this part of your business simple.


2021 Mileage Tax Deduction Rate

The IRS allows you to choose from two methods to calculate travel/mileage deductions. The more simple of the two is by utilizing the standard mileage rate. Under this method, you take the rates as set by the IRS each year and multiply your business miles by the standard mileage rate. For the 2021 tax year, the standard rate is 56 cents per mile so if you drove 1,000 business miles in 2021 your deduction would be $560.


If you opt for the actual expense method, you deduct a portion of your actual expenses from operating your vehicle. These expenses might include gas, insurance, lease payments, repairs and maintenance, depreciation, and other car operating costs. This method still requires you to track business mileage and related receipts throughout the year.


 

Like so many things when it comes to taxes, the rules around travel expenses aren’t as clear as we’d like them to be. In order to remain compliant with applicable rules you should be aware of the IRS guidelines around travel and mileage expenses, have a system in place to track mileage and travel expenses, and consult a CPA.


13 views0 comments

Commentaires


bottom of page