Pick your method first. The IRS gives you two options for deducting vehicle expenses: standard mileage rate or actual expenses. Standard mileage means you multiply business miles driven by the current rate (67 cents per mile for 2024). Actual expenses means you track everything like gas, insurance, repairs, depreciation, and registration, then deduct the business-use percentage. You can’t switch back and forth freely, so this decision matters.

Standard mileage works well if you drive a fuel-efficient car and don’t have major repair bills. Actual expenses usually save more if you drive a truck, have high fuel costs, or put significant money into maintenance. The only way to know which saves more is to track both for your first year and compare.

Track every business trip as it happens. The IRS requires you to document the date, destination, business purpose, and miles driven for each trip. “Drove around for work” doesn’t count. “Met with client at 4521 Camelback Rd to review project” does. Apps like MileIQ, Everlance, or TripLog run in the background and automatically log your trips. You just classify each one as business or personal at the end of the day.

If you prefer manual tracking, keep a notebook in your vehicle or use a spreadsheet. Write down every business trip with all four required elements. Most people find this tedious and eventually stop, which is why apps work better for consistency.

For actual expenses, save every receipt related to your vehicle. Gas, oil changes, tire rotations, repairs, car washes, parking fees, tolls, registration, and insurance all count. If you can’t produce receipts during an audit, you lose the deduction. Digital copies organized by month work fine. Full-service bookkeeping includes categorizing these expenses monthly so they’re properly recorded and ready when you need them.

Calculate your business-use percentage accurately. If you drove 15,000 total miles last year and 10,000 were for business, your business-use percentage is 67%. That means 67% of your actual vehicle expenses are deductible. Getting this number wrong in either direction creates problems. Understate it and you leave money on the table. Overstate it and you’re exposed if audited.

Commuting doesn’t count as business mileage. Driving from home to your regular office is personal, not business. Driving from your office to a client site is business. Driving from home to a temporary work location can qualify. The rules are specific and worth understanding before you start claiming miles.

Keep records for at least three years after filing. The IRS can audit that far back, and they’ll want to see your mileage log and receipts. An app that stores historical data makes this easy. Paper logs work if you actually keep them organized.

The biggest mistake business owners make is tracking inconsistently. You track religiously for January, sporadically for February, and give up by March. Then at tax time you guess at your mileage and hope for the best. That approach leaves deductions on the table and creates audit risk.

A Scottsdale bookkeeper can help you set up a tracking system that fits your routine and make sure vehicle expenses flow correctly into your accounting software throughout the year.