Mileage tracking is the process of keeping a record of the number of miles driven for business or work-related purposes. Independent contractors or self-employed individuals should care about mileage tracking because it can help them reduce their tax liability and maximize their deductions.
In the United States, self-employed individuals can deduct the cost of using their personal vehicle for business purposes on their tax return. This deduction is calculated based on the number of miles driven for business purposes, multiplied by the standard mileage rate, which is set by the IRS each year.
By tracking their mileage, independent contractors or self-employed individuals can accurately calculate their deductions and potentially save money on their taxes. Additionally, keeping accurate mileage records can help individuals demonstrate the legitimacy of their business expenses in case of an audit.
There are various ways to track mileage, including using a paper logbook, a spreadsheet, or a dedicated mileage tracking app. Many apps can automatically track mileage using GPS technology, making the process more convenient and efficient. Regardless of the method used, it’s important to maintain accurate and detailed records that include the date, starting and ending location, purpose of the trip, and number of miles driven.