Keeping Automobile Records

If you want to deduct expenses for the use of a car for business or employment, for charitable work, or to get to medical appointments, you must keep mileage records of your driving for any of these tax-deductible purposes. In fact, the IRS specifically asks you on your tax return whether you have written evidence of your auto expenses and is likely to deny your deduction if you don't have them.

At a minimum, you should keep a notebook in the car and record your odometer reading at the beginning and end of the year. In between, you should record your starting and stopping odometer reading for each business trip you take and for any other deductible driving you do, as well as the reason for the trip.

Save Money If you have a good memory, you can choose to update your mileage records every week or two, but we don't recommend it. It's just too easy to forget those short trips to the bank or office supply store. Over the course of the year, those forgotten trips can really add up! It's better to get into the habit of jotting down the facts at the start and end of every trip.

If you commute to a regular place of business, you'll also need to know the distance from your home to your workplace, as well as the number of commuting trips you made during the year, because the IRS specifically asks for this information.

At the end of the year, you'll need to compute the total number of miles you drove during the year and the total number of business miles. Then, you'll divide the number of business miles by the total number of miles driven. The answer you get represents your percentage of business use for the year. Save this number — you'll need it when you compute your deductible vehicle expenses!

Example Mikio Nagano's initial odometer reading for the year was 23,456, and her ending reading was 33,500. So, her total mileage for the year was 10,044. During the year, she recorded a total of 34 business trips, with a total mileage of 800 business miles. So, her business usage of the vehicle was 800/10,044 = .0796, or about 8 percent.

You don't have to keep substantiating records for the business use of any vehicle that, by its very nature, is not likely to be used more than a very minimal amount for personal purposes. This includes various heavy trucks, buses, police and fire vehicles, taxi cabs, cranes, forklifts, tractors, and similar vehicles.

Standard Mileage Rate. In response to increased gasoline costs, the IRS increased the standard mileage rate for business, moving and medical use of a car in the middle of 2011. Therefore, the amount that you can deduct will depend upon both the purpose for your trip and when you drove the vehicle.

From January 1, 2011 through June 30, 2011, the standard mileage rates were as follows:

• Business use: 51 cents per mile
• Moving and medical use: 19 cents per mile

From July 1, 2011 through December 31, 2011, the standard mileage rates were as follows:

• Business use: 55.5 cents per mile
• Moving and medical use: 23.5 cents per mile.

For 2012, the standard mileage rates are

• Business use: 55.5 cents per mile;
• Moving and medical use: 23 cents per mile.

Use of car for charitable purposes. The rate for charitable driving is specified in the statute and is not adjusted for inflation. Therefore, the standard mile rate for charitable purposes was 14 cents per mile for all of 2011 and will continue to be 14 cents per mile for 2012.

Those opting to use the actual cost method for calculating their business-related auto expenses will also have to keep records for all car expenses during the year including gas and oil, cleaning and washing, repairs and maintenance, insurance, interest on a vehicle loan, tires and supplies, parking and garage rental, tolls, motor club membership, personal property taxes, depreciation, if you own the vehicle, and lease payments if you lease the vehicle.