Mileage Log or Actual Vehicle Costs: What Records Each Method Needs

The two ways to track a vehicle

When you use a personal vehicle for business, or a business vehicle for personal trips, the costs can go in your books two ways. Each one needs its own kind of record, and each one works only when the records are kept up.

The first way is a mileage log. You track every mile you drive for the business. The total business miles become the number your CPA works from. The log is the record. If the log is missing, the number is hard to defend.

The second way is actual costs. You track what the vehicle really costs to run. Fuel, repairs, insurance, registration, oil changes and the rest. Then you split the total between business use and personal use. The split is based on how much the vehicle was used for business versus personal trips.

Both methods are real. Both need records. The one that saves you more is a tax question, and that is your CPA's call. We do not prepare taxes or give tax advice. What we do is keep the records clean so your CPA can pick the method that fits.

Here is how the two methods compare.

The records are different. The goal is the same. Keep the business vehicle costs in the books and keep the personal use separate.

What a mileage log needs

A mileage log is a running list of every business mile. It does not track fuel or repairs. It tracks miles. Each entry has the date, the start and end of the trip or the total miles, and the reason for the trip. A trip to a job site, a run to the supply store, a visit to a client. Each one goes in the log.

The log has to be kept up. A log written from memory at year end is hard to trust. A log kept every day, or every week, is the kind of record that holds up. We do not keep the log for you. What we do is take the log you keep and make sure the total lands in the books in the right place.

Here is what a clean entry looks like.

A good log also notes the vehicle. If you use more than one vehicle for the business, each one has its own log. The odometer reading at the start and end of the year helps too, because it shows the total miles the vehicle was driven, business and personal combined.

The mileage log does not track fuel, insurance or repairs. If your CPA picks the mileage method, those costs do not go in the business books as vehicle costs. They are personal costs in that case, because the mileage rate is meant to cover them. Your CPA decides that. We follow what they tell us.

The trouble starts when the log is thin. A few entries, then nothing for weeks. Or a total at the end with no dates or trips. That kind of log is the one we see most often when we clean up past months. We help you figure out what is there, but we can not create miles that were not logged. The log is your record. We make sure the books match it.

What actual vehicle costs need

Actual costs are the real bills. Fuel, repairs, insurance, registration, oil changes, tires and any other cost of keeping the vehicle on the road. Every one goes in the books as a vehicle cost. The receipts and the bills are the proof.

When you track actual costs, the books hold the full cost of the vehicle. Then the business share is split out. The split is based on how much the vehicle was used for business. If half the miles were business, about half the costs are business. The share is your CPA's call. We record the full costs and keep the bills on file. Your CPA figures the share.

Here is what we track when you use actual costs.

Each one gets its own line. When the month closes, the totals are in the right spots. The receipts are tied to the transactions so the proof is on file.

The mileage log still matters here. Even with actual costs, your CPA needs the business miles to figure the share. So the log and the bills work together. The log shows how much was business. The bills show what the vehicle cost. We keep both in the books.

One common slip is mixing the vehicle costs into a general line called auto expenses. Fuel, insurance and repairs all in one row. At year end, no one can tell what was what. We set up separate lines for each vehicle cost, so the totals are clear from the start.

Keeping personal use out of the business books

A vehicle used for both business and personal trips is where the mix happens. A business truck that also drives the kids to school. A personal car that also goes to job sites. The costs are real, but only the business share belongs in the business books.

When you use the mileage method, the business miles go in the books. The fuel and repairs do not, because the mileage rate covers them. When you use the actual cost method, the full costs go in the books and the business share is split out. Either way, the personal part stays out of the business numbers.

Here is what to do when a vehicle is used for both.

• **Keep a mileage log, even with actual costs.** Your CPA needs the business miles to figure the share.
• - **Record the full vehicle costs if you use actual costs.** Fuel, repairs, insurance and the rest each in their own line.
• - **Do not put the personal share in the business books.** It does not belong there, even if the same vehicle is used for both.
• - **Keep the odometer reading at the start and end of the year.** It shows the total miles and helps your CPA figure the split.
• - **Tie every receipt to the transaction.** The proof stays on file so nothing is missing at year end.

The clean way is to keep the log up, record the costs in the right lines, and let your CPA split the share. We help you hold that line every month.

Which records we keep either way

Some records matter no matter which method you use. The mileage log and the bills are the big two. There are a few more that make the books easier to close and the year end easier to hand off.

We keep the vehicle costs in their own lines, not in one general row. We tie the receipts to the transactions. We keep the full bills on file. We note which vehicle each cost belongs to if you have more than one. And we track the odometer reading at the start and end of the year, because your CPA needs it either way.

Here is what we keep on file for each vehicle.

• **The mileage log: ** the date, the trip and the miles for every business drive.
• - **The odometer reading: ** at the start and end of the year for each vehicle.
• - **The fuel receipts: ** each one tied to the transaction.
• - **The repair and maintenance bills: ** each one in its own line.
• - **The insurance and registration bills: ** each one recorded and on file.
• - **A note on the method: ** whether your CPA picked the mileage method or actual costs.

Keep the records in one place. We tie them to the books as we go, so nothing is missing at year end.

What your CPA decides, not us

We keep books and run payroll. We do not prepare taxes. We do not give tax advice. We do not tell you which method saves you more or what share of your vehicle to claim. Those are calls for your CPA or tax preparer.

What we do is keep the records clean so your CPA has good numbers to start from. The mileage log is kept up. The costs are in the right lines. The receipts are tied to the bills. The personal use is kept out. Your CPA can read the books and make the calls.

When the tax questions come up, we point you to your CPA. We answer their questions about the books, but we do not give the advice. You can read more about how we keep the books on our bookkeeping page, and about payroll on our payroll page.

A situation we clean up

The fuel receipts that went nowhere

A small business owner uses a truck for work and for personal trips. Every fuel receipt goes in a shoebox. No mileage log. The fuel costs go to one line called auto expenses in the books. At year end, the CPA asks how much of the truck was business and how much was personal. The owner can not tell from the books, and the receipts are in no order.

Here is how we handle it. We set up separate lines for each vehicle cost. We sort the fuel receipts and tie each one to the transaction in the books. We start a mileage log going forward, with the odometer reading from the start of the year. We add a note that the business share is your CPA's call. We close each open month one at a time, from the oldest forward. Then the routine runs every month, so the next year end starts with clean books and a log that is kept up.

Common questions

Do I need a mileage log if I track actual vehicle costs? Yes. Your CPA needs the business miles to figure the business share of the actual costs. The log and the bills work together. We keep both in the books.

What records does the mileage method need? A log of every business mile, with the date, the trip purpose and the miles. The log has to be kept up. We take the log you keep and make sure the total lands in the books in the right place.

How do you keep personal vehicle use out of the business books? When you use the mileage method, only the business miles go in the books. When you use actual costs, the full costs go in and the business share is split out. Either way, the personal part stays out of the business numbers.

Do you tell me which method to pick? No. We do not prepare taxes or give tax advice. We keep the records clean either way, and your CPA picks the method that fits. You can reach us on our contact page if you want a team that keeps your vehicle books clean.