As tax season approaches, many individuals and businesses are looking for ways to maximize their deductions and reduce their tax liability. One often overlooked deduction is mileage, which can be a significant expense for those who use their vehicles for work-related purposes. Fortunately, tracking mileage for taxes has become easier than ever thanks to smartphone apps and other digital tools.
In this comprehensive guide, we will explore how to track mileage for taxes on your phone, step by step, using proper subheadings, tables, and other useful information.
Why Track Mileage for Taxes?
Before we delve into how to track mileage for taxes, it’s essential to understand why tracking mileage is important for taxes. When you use your vehicle for business, medical, moving, or charitable purposes, you may be eligible for tax deductions. These deductions can significantly reduce your taxable income, potentially leading to a lower tax bill or a larger refund.
Types of Mileage Deductions
There are four primary categories of mileage deductions:
- Business Mileage: If you use your vehicle for business purposes, such as driving to meetings, visiting clients, or making deliveries, you can deduct the mileage.
- Medical Mileage: When you incur medical expenses that require travel, such as going to the doctor’s office, hospital, or pharmacy, you can deduct the mileage.
- Moving Mileage: If you move for work-related reasons, you can deduct the mileage associated with the move.
- Charitable Mileage: If you volunteer for a qualified charitable organization and use your vehicle for volunteer work, you can deduct the mileage.
Now that we’ve established why tracking mileage is important let’s move on to the practical steps for doing so with your smartphone.
Step-by-Step Guide to Tracking Mileage on Your Phone
Step 1: Choose a Mileage Tracking App
The first and most crucial step in tracking mileage for taxes on your phone is selecting the right app. There are several mileage tracking apps available for both iOS and Android devices, and they vary in features and usability. Here are some popular options:
|MileageWise||Free with limited features, $9.99/month||Automatic mileage tracking, trip categorization, mileage reporting, expense tracking, tax estimation, compliance tools|
|Everlance||Free with limited features, $12/month||Automatic mileage tracking, trip categorization, mileage reporting, expense tracking|
|Hurdlr||Free with limited features, $16.99/month||Automatic mileage tracking, trip categorization, mileage reporting, expense tracking, invoicing|
|MileIQ||Free with limited features, $5.99/month||Automatic mileage tracking, trip categorization, mileage reporting|
|Shoeboxed||Free with limited features, $29/month||Automatic mileage tracking, trip categorization, mileage reporting, receipt scanning|
|Stride||Free with limited features, $9.99/month||Automatic mileage tracking, trip categorization, mileage reporting, expense tracking|
Choose an app that suits your needs and budget, and ensure it provides IRS-compliant mileage tracking features.
Step 2: Install and Set Up the App
Once you’ve chosen a mileage tracking app, download and install it on your phone. Apps are also available for iOS for tracking miles on iPhone. Follow the app’s on-screen instructions to set up your account and configure your preferences. This usually involves providing your name, email address, and other basic information.
Step 3: Enable GPS Tracking
To accurately track your mileage, most mileage tracking apps rely on GPS technology. Make sure to enable GPS tracking on your smartphone and grant the app permission to access your location while in use.
Step 4: Start Tracking Your Trips
Now that your app is set up and GPS tracking is enabled, you can start tracking your trips. Every time you embark on a qualifying journey (business, medical, moving, or charitable), open the app and initiate mileage tracking. The app will record the start and end points, distance traveled, and the date and time of the trip.
Step 5: Categorize Your Trips
As you track your trips, categorize them correctly based on their purpose. Most apps allow you to label each trip as business, medical, moving, or charitable. Proper categorization is crucial for accurate tax deductions.
Step 6: Review and Export Reports
Periodically, review your mileage logs within the app to ensure all trips are accurately recorded and categorized. Most apps also offer the option to generate detailed reports. Export these reports as PDF or Excel files, which you can later provide to your tax professional or use when filing your taxes.
Step 7: Store Your Records Safely
Maintaining accurate records is essential for tax purposes. Store your mileage records securely, either digitally or in hardcopy. Some apps offer cloud storage options, which can be a convenient and secure way to safeguard your records.
Tips for Successful Mileage Tracking
Here are some additional tips to ensure successful mileage tracking for taxes:
- Be Consistent: Track all eligible trips consistently throughout the year. Don’t wait until tax season to start recording your mileage.
- Use a Phone Mount: Invest in a phone mount for your car to ensure easy access to your mileage tracking app while driving.
- Backup Your Data: Regularly backup your mileage data to prevent loss in case of phone damage or loss.
- Keep Supporting Documentation: In addition to mileage records, retain any supporting documentation, such as receipts for fuel, maintenance, or tolls.
- Consult a Tax Professional: If you have complex tax situations or are unsure about deductions, consult a tax professional for guidance.
Tracking mileage for taxes on your phone has never been more accessible and efficient, thanks to the wide range of mileage tracking apps available. By following the step-by-step guide outlined in this blog, categorizing your trips accurately, and maintaining proper records, you can maximize your mileage deductions and potentially reduce your tax liability. Remember that tax laws and regulations can change, so it’s essential to stay informed and consult a tax professional for the most up-to-date advice and guidance on your specific tax situation. Happy tracking and happy tax savings!