Employee vs. Self-Employed Mileage Deductions
If you drive a vehicle for business purposes, you’re likely aware of the fact that you can save money on job-related driving expenses. Whether you’re self-employed and drive your car to meet with clients or for Uber, or you’re a full-time employee who uses your personal car for work-related meetings outside of the office, the end result is the same: the expenses associated with driving for work don’t have to come out of your own pocket.
However, there are some key differences between how self-employed folks and employees get to save money for miles driven. To put it simply, employees track their mileage to get reimbursed by their employers via an expense report, whereas independent contractors track miles to claim a tax deduction.
Now, it can get a bit more complicated than that, so today we’re going to talk about the difference between the employee mileage reimbursement vs. the self-employed mileage deduction. Let’s get to it.
Employee Mileage Reimbursement
When we talk about mileage deductions or reimbursements, we are talking about what the IRS refers to as “the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes”. For employees, specifically, these deductible costs come in the form of the employee mileage reimbursement. This is a fancy term that basically says that when you drive your own vehicle for work related purposes, you can get refunded, or reimbursed, for miles accrued.
This is how employee mileage reimbursement works: To get reimbursed, you will need to provide your employer with an expense report, i.e., a detailed "daily log showing miles traveled, destination, and business purpose". In your filings, include a mileage log, gas receipts and other permissible driving-related expenses. Keep in mind that thorough, clear records are critical to getting reimbursed. Without them, your employer may deny your claims, leaving you to foot the bill for all those miles driven for work-related meetings and trips.
Another thing to note is that employers tend to reimburse employees at the federal standard mileage rate, which is set by the IRS. As we’ve talked about in a recent post, the standard mileage rate changes year to year and has increased along with the (generally) rising costs of insurance, registration fees, gas prices, etc.
If you’re one of those employees that tends to drive frequently for your job, then the employee mileage reimbursement can result in significant savings.
Self-Employed Mileage Tracking
Now, it’s time to talk about the self-employed mileage deduction. For rideshare drivers, freelancers and anyone else filing 1099’s, you will need to keep track of your business mileage. Mileage tracking refers to keeping a mileage log of miles driven for the purpose of tax deduction or reimbursement. As mentioned above, for 2021 tax filings that are due in 2022, you can claim a 56-cent deduction per business mile driven. Personal mileage driven for charity work, medical purposes or moving can also be deducted under certain circumstances, and the rates differ from business mileage.
What To Be Aware Of With Self-Employed Mileage Tracking
For freelancers and solopreneurs, there are some important things to keep in mind when tracking your mileage. For instance, in your mileage log, you will need to include miles driven, dates, destinations, and purpose(s) for your trip. Unfortunately, you can’t deduct your commute to and from your office (sorry).
Be aware that if you take the Standard Mileage Rate, there are a few cannots:
- You cannot deduct any expenses that relate to the operation of your vehicle (gas, maintenance, etc.) but you still can deduct parking and toll expenses.
- You cannot switch methods (Standard Mileage Rate to Actual Expenses Method or vice versa) in the same year.
- If you *rent* (not lease) a car, you cannot use the Standard Mileage deduction method, only Actual Expense Method (including the rent expense of the car, gas, etc.)
And, while this may seem obvious, it’s still worth noting: you MUST use the mileage rate of that specific year. So if you're filing taxes in 2022 for the 2021 tax year, you still have to use 2021 rates. The best way to track your mileage is to do so on a daily basis. This may sound laborious, but with a mileage tracking app, this is done automatically for you.
Benefits Of Using A Mileage Tracking App
While some may prefer good old spreadsheet accounting, there are a number of benefits of opting for an app to track your business mileage. For example, the Hurdlr app can track your business miles for you automatically, so you don’t have to. Whether you’re self-employed or a full-time employee (or some combination thereof), Hurdlr can help you:
- Save Time. Our app eliminates the need to keep a manual mileage log— Just drive!
- Save Money. Hurdlr automatically capture all of your drives, deductions and reimbursements.
- Stay Organized. We ensure that drivers are always up to date with tax reports that make tax filing a breeze and expense reports that make reimbursement painless.
Ultimately, by taking either the employee mileage reimbursement or the self employed mileage deduction, you can cut down a fair amount on your business expenses. All it takes is some organizational skills (or an app)
Here Are 16 Real Estate Agent Tax Deductions
Gig Economy Jobs Like Uber
As an independent contractor, driving for an on demand economy company gives you the ability make money with your extra time. Drive during your lunch break, at night, or during busy weekends – it’s up to you. However, these companies don’t only provide taxi-style services; companies like HopSkipDrive enable the driver to chauffeur kids to their activities around town, similar to a nanny. Other rideshare companies allow the individual to use their vehicle to make extra cash by renting it out or sharing a ride to work. If you have a car, then there’s an on demand economy opportunity out there for you.
Gig Economy Sites Like Airbnb
Make money off renting out your home, car, boat, tools, or almost anything with these sites like Airbnb. If you are out of town, make money while you are away. If you have free space in a home you live in, you can leverage that too. You can also choose specifically who you would like to rent to – say, a college sports fan. Check these hosting companies out below.
Gig Economy Delivery Jobs Like Postmates
Delivery jobs vary in their specific functions, but they all allow independent contractors like yourself to travel, create a flexible schedule, and deliver goods (as opposed to passengers). Jobs like Postmates give you the ability to work short gigs during times like your lunch break or at night, while others like Roadie allow you to use space in your car for somewhere you are already going to deliver a package.
Unskilled On Demand Jobs
If you’re looking to help someone out and make some quick cash, then this section is for you. These companies function as automatic lead generators: instead of finding gigs by yourself, these companies give you the gigs. If you enjoy working with people and assisting them with their problems, many of the companies listed allow you to do just that.
Gig Economy Jobs for Freelancers
Freelancing allows individuals to work wherever they want, whenever they want, with whoever they want. Freelance occupations range from bloggers, lawyers, chefs, stylists, caregivers, techies, and many more. If you like the freedom to travel and be your own boss, check out the companies below.
Rideshare Companies With Jobs Like Uber
As an independent contractor, driving for an on demand economy company gives you the ability make money with your extra time. Drive during your lunch break, at night, or during busy weekends – it’s up to you. However, these companies don’t only provide taxi-style services; companies like HopSkipDrive enable the driver to chauffeur kids to their activities around town, similar to a nanny. Other rideshare companies allow the individual to use their vehicle to make extra cash by renting it out or sharing a ride to work. If you have a car, then there’s an on demand economy opportunity out there for you.
Sites Like Airbnb
Make money off renting out your home, car, boat, tools, or almost anything with these sites like Airbnb. If you are out of town, make money while you are away. If you have free space in a home you live in, you can leverage that too. You can also choose specifically who you would like to rent to – say, a college sports fan. Check these hosting companies out below.
Delivery Jobs Like Postmates
Delivery jobs vary in their specific functions, but they all allow independent contractors like yourself to travel, create a flexible schedule, and deliver goods (as opposed to passengers). Jobs like Postmates give you the ability to work short gigs during times like your lunch break or at night, while others like Roadie allow you to use space in your car for somewhere you are already going to deliver a package.
Unskilled On Demand Jobs
If you’re looking to help someone out and make some quick cash, then this section is for you. These companies function as automatic lead generators: instead of finding gigs by yourself, these companies give you the gigs. If you enjoy working with people and assisting them with their problems, many of the companies listed allow you to do just that.
Freelance On Demand Jobs
Freelancing allows individuals to work wherever they want, whenever they want, with whoever they want. Freelance occupations range from bloggers, lawyers, chefs, stylits, caregivers, techies, and many more. If you like the freedom to travel and be your own boss, check out the companies below.
