Working as a rideshare or delivery driver has a lot of advantages. You get to set your own schedule, adjust your work hours based on how much you want to make, and never have to deal with mean bosses or unpleasant coworkers. It can feel like a dream job if you’ve never had the freedom that self-employment brings.
With this great freedom, however, comes a new set of responsibilities. You have to worry about things like managing your operating costs, providing top customer service, setting up your own retirement plan, and paying your self-employment taxes. We’ve written about self-employment taxes in the past, but in this guide, we want to focus on a crucial method for reducing your business taxes.
It involves tracking how many miles you drive for Uber, Lyft, Postmates, or whatever other platform you use. This way, you can report the mileage at tax time, claim the mileage deduction, and reduce the amount of money you owe the IRS.
In today’s post, we’re going to show you why it’s important to track your mileage, how to do it, and ten apps you can use to make mileage tracking easy.
- Why You Need to Track Your Mileage
- How to Choose a Mileage Tracking App
- 10 Best Mileage Tracker Apps
- Mileage Tracking FAQ
Why You Need to Track Your Mileage
If you’re a new rideshare driver or delivery driver, you may have never thought about keeping track of how many miles you drive. Aside from an occasional glance at the odometer to see if you’re due for an oil change, most people don’t pay much attention to how many miles they drive on a daily basis.
As an Uber driver, Lyft driver, or anyone else who drives for business, you absolutely should keep track of the number of miles you drive. This is because all drivers for these platforms are independent contractors.
As an independent contractor, the company you work for does not reimburse you for using your personal vehicle. All the money you spend on gas, maintenance, car payments, and insurance comes out of your own pocket. This can cause a financial sting when you’re first getting used to it, but there is a silver lining.
Although you don’t get reimbursed for the miles you drive, the Internal Revenue Service does allow you to write your driving costs off as a business expense.
For those of you who don’t already know, the IRS allows drivers to charge $0.545 cents per mile against their income. So, for every 100 miles you drive while working, you can subtract $54.50 from your gross income and pay taxes on the reduced figure.
And since most drivers don’t meet the standard mileage rate of $0.545 for every mile while they drive while working, most won’t have to pay any taxes at all on their driving income – if… they’re able to document their mileage.
There are two ways you can do this. The first is called the actual expense method. With this approach, you keep detailed records of all the expenses you incur while driving your car for business use.
Qualified deductible costs include the following:
- Registration fees
- Depreciation (or lease payments)
As a rideshare or other independent contractor driver, there are some problems with this method. The main issue is that, since you’re using your personal vehicle, it’s difficult to say what percentage of the above expenses come from driving your car for business use vs. driving it for personal use.
For instance, let’s say that you drive for Uber a few hours after work each day to earn extra money. Doing this obviously increases the amount of gas you use and the frequency with which you have to get oil changes.
However, since you also use your car to commute to your day job, run errands, and even take the occasional vacation, it’s difficult to say what percentage of your driving car expenses come from driving for Uber.
It is possible to figure it out, but it requires very detailed record keeping and possibly precise instruments to measure exactly how many gallons of gas you use during an Uber shift. Even then, you run the risk of making a mistake (something you never want to do when preparing your tax return).
Recognizing the complexity of keeping track of your actual costs when using your vehicle, the IRS has another method you can use. It’s called the standard mileage rate, and it makes things a lot simpler. Instead of having to keep track of dozens of expenses, you only have to track the number of miles you drive.
To get your deduction, you just multiply the number of business miles you drove by the IRS standard mileage rate. Specifically, you want to use the business standard mileage rate. For the 2019 tax year, the business mileage rate is 58 cents per mile.
You can find a complete, up-to-date list of all the standard mileage rates on IRS.gov. It includes information on the rates not only for business travel expenses, but also the charitable rate, medical rate, and moving expense rate.
If discussions of standard deductions, depreciation methods, mileage tracking, IRS mileage rates, and business expense tracking makes your head spin, don’t worry. You don’t have to be a math genius, tax lawyer, or accountant to track mileage like a professional.
Recognizing that small business owners like you have more important things to worry about, a number of companies have created mileage tracking apps to make tracking mileage nearly automatic. These apps will generate a mileage report that you can refer to at tax time (or just pass along to your accountant if you prefer).
How to Choose a Mileage Tracking App
To track your mileage, all you really need is a smartphone and the right mileage tracking app. If you’re doing any kind of gig work that involves driving, you already have the smartphone. So the next issue is choosing the app for the job. We’ll get into some specific recommendations in a moment, but let’s first look at some general features to look for when choosing a mileage tracker.
There are a few features most tracking apps have that we consider essential to a mileage tracking app. They are:
Additionally, you want something that doesn’t use lots of battery power and doesn’t take up excessive space on your phone. To track your mileage, the app will need to use your phone’s locations services and GPS function. This will require some battery power, but ideally not too much (since rideshare and navigation apps already have high levels of battery usage).
Next, you want an app that’s easy to use. This seems like an obvious consideration, but it’s easy to get sucked in by advanced features and detailed reports, only to find yourself fiddling with dozens of options just to get the app started at the beginning of your shift. Any time you spend trying to get the app is (unpaid) time you could be spending earning money, so picking an app that’s easy to use is critical not just for your sanity but also for your profitability.
Finally, you want to choose an app that provides accurate, IRS-compliant data. In theory, tracking mileage using an app is simple. The app just gets your location using GPS and then recognizes that you’re moving based on your changing GPS location. From there, it’s simply a matter of converting that into miles.
Navigation apps have been doing this since the days of dashboard-mounted GPS units, but some apps still accomplish it better than others. A good test is to set your car’s trip odometer, turn on the app, and then drive a short distance.
Compare the app’s mileage to your odomoter’s to determine accuracy. There might be very minor variation (fractions of a mile if your app is that accurate), but there shouldn’t be any large differences. If there are, get a different app (or have a mechanic examine your odometer).
But which app should you use? In the next section, we’ll take a look at some of the best options out there.
10 Best Mileage Tracker Apps to Use
You may have read up to this point and are thinking, “Okay, great, but can you just tell me which app I should use?” We understand. So now we’ll get right down to it.
For the purposes of this article, we’ve included only the essential facts about each. This way, you can spend less time reading about mileage tracking apps and more time earning money.
TripLog Mileage Tracker
TripLog is a full-featured mileage tracking app that features what they call MagicTrip™ which is a fully automatic way of starting the app when you start driving.
You can set it up to automatically trigger and start tracking your travels by several nifty methods. You can set it up to begin tracking your travels when it connects to Bluetooth in your car or when you travel at a certain speed, say 10 mph and several other methods.
This is my preferred mileage tracker and one I’ve been using for 3 years now. I set it and forget it. I never have to remember to turn it on when I start driving and it has been flawless in its operation. It, like many of the apps, also saves all your travel data to the web (or cloud) and you can login there to sort, analyze and download reports.
Every year when I do my taxes, it takes me just 10 minutes with TripLog to accurately obtain all my business driving mileage data.
TripLog has a free basic plan that saves your GPS mileage tracking, showing your actual driving routes on Google maps.
Their basic paid version is $20 per year and adds several useful features including comprehensive IRS compliant reports. And it is this version that comes with the ability to be fully-automated in connection with the Bluetooth connection in your car.
TripLog has recently come out with a very nice looking modern version 2.0. I just tried it out recently and it’s a beautiful app and retains all the solid functionality it had before.
Probably the best thing about TripLog is its complete and unfailing automation. I’ve used this app for several years. You can literally set it and forget it.
You can tell it to log miles only during certain hours or on certain days. Or, you can tell it to log all miles when certain conditions are met. I have it set to begin logging all miles when my phone is connected to BlueTooth in my car and when I am moving at more than 7 mph. And it has never failed.
Another very convenient feature of TripLog is you can put a widget on your screen that will instantly tell you its status. Once you start driving, you’ll always see the mileage count ticking upward. That lets you know it’s up and running. It’s a very quick and easy way to check to make sure it’s clocking your mileage.
It also backs everything up to the cloud and it allows you to take photos of receipts in order to record expenses outside of mileage. As an Uber/Lyft driver you can deduct any meals you have while you’re out driving and of course any car expenses such as gas or oil changes, etc.
In the Android app store, TripLog has a high rating of 4.6 out of 5 stars with 1,078 five-star reviews compared to only 65 one-star reviews. It also has more than 100,000 installs – signaling that the app developer is dedicated to it and will be around for a long time.
With TripLog you can also take a photo of any receipts for business expenses and they’ll save it on their server for you. You can also write notes on it describing what the exact nature of the business expense was.
All-in-all, this app will do everything you need as far as tracking not only your mileage but all your business-related expenses. And because I’ve used it for so long and seen that it works flawlessly and does a solid job at what it’s supposed to do, this is our #1 choice.
GOFAR is an accurate and reliable IRS-compliant mileage tracking app and device that fully automates your work-related rideshare driving expenses.
And it can also save you up to 30% on your fuel costs.
Rideshare drivers across the USA, UK, Canada, Australia and Singapore use this app to track their work-related miles. And it works in any gas, diesel or hybrid vehicle manufactured from 2007 onwards, as well as many earlier car models.
Adding a trip to GOFAR’s digital log as a business expense is as easy as swiping right. It automatically records all information about the drive and you can export and email a report to your desktop in just a few taps.
Reporting includes start / end odometer readings, time and date stamps, fuel cost for each drive, gas fill-ups, and you even choose custom or IRS rules (or ATO in Australia).
GOFAR automatically logs all your trips by detecting when the engine is running – so no fiddling with apps or pen and paper. Its on-device storage means it works even if your phone dies, so it never misses a trip.
Installation is dead easy with no tools or technical skills required.
GOFAR includes an iOS or Android app, a OBD2 port adapter and an optional dashboard-mounted Ray device that helps you drive more efficiently.
GOFAR was invented by Australian rocket scientist Danny Adams. Since its release in 2016, GOFAR-connected cars have logged more than 70 million kilometres in more than 50 countries across six continents, so they have the data to prove its fuel-saving claims.
Out of all the mileage trackers we’ve looked at and all the ones that have claimed that they are more than just mileage trackers, Hurdlr is the only one that actually is much more than just a mileage tracker.
It’s actually a business expense tracker which includes automatic mileage tracking. But it’s specially designed for independent contractors – which is exactly what Uber drivers and other gig economy workers are.
But, the really cool thing is that Hurdlr can login to your Uber and Lyft accounts directly and get your income. Then, it will tell you exactly how much your estimated taxes are – on the fly.
At any given moment, you can check with the app and see your driving income minus your mileage expenses and minus other expenses too!
If you have a business bank account setup just for your business income and expenses, Hurdlr can login to your bank as well and get your actual deposits and expenses from there.
So, if you’ve been good and used your business account for legitimate business purposes only – you’ll have a very accurate snapshot of your tax situation at any given minute! And since gig economy workers have to pay estimated taxes quarterly, Hurdlr can give you a quick snapshot and a rough estimate of how much those taxes might be. This makes it very easy for drivers and other independent contractors to have a rough idea of how much they should be saving each week so they won’t be hit with a big tax bill later that they can’t pay.
Hurdlr can be programmed to connect with all kinds of gig economy jobs – not just Uber and Lyft. It can also connect to Postmates, Instacart, Lyft, Handy Cleaners, Uber Eats, and even Airbnb, HomeAway and VRBO too! It can also connect to Square, so if you take any business payments with Square it will be able to integrate your income from there as well.
The benefit of this – is that you’ll have a great estimate, at all times, of approximately how much you owe in taxes at that moment, based on what you’ve made for the year so far. That makes it much easier to make those quarterly tax payments. And if you’re making those quarterly tax payments things will be much easier for year when next April 15th comes around – because you will have already paid most of what you owe, if not a little more. In any case, you won’t be looking at some huge tax bill that you no longer have the money to pay!
As far as mileage tracking, I have tested it and it works fine. You can set it to let you manually tell it when you want to begin tracking or you can set it to automatic and it will begin tracking on its own. However, you’re really not going to want to use it in manual mode. You’ll remember the first few times to start it up but after a while you’ll start to forget and you’ll lose a lot of mileage that way.
When you set it to automatic, it can take up to a half a mile of driving before it kicks in and starts tracking your movements. That means you could lose up to a half mile every time you start up again. All these automatic trackers will lose some mileage though when they’re set to automatic.
I contacted their support several times in a two-day period and they got back to me very quickly, they were very friendly and knowledgeable – and they weren’t located on the other side of the world. They seemed very enthusiastic about their product and it sounded like they’re working hard on it every day. All in all, this is a very solid choice. Along with TripLog, it’s in our Top 2.
They’ve had between 100,000 – 500,000 downloads in the Google Play store so they have a large enough customer base that they should be around for a long time.
|Also see: The 21 Essential Apps for Uber Drivers|
Everlance has an excellent 4.8 stars on the Android app store – out of 5,311 reviews. They’ve also had more than 100,000 downloads so they have a sizable customer base that should insure they’ll be around for a while.
But the weird thing about their high star rating is I found a lot of serious complaints in their reviews over the last couple of months.
So, I went in and added up the total star ratings in their most recent 50 reviews and averaged them together and I came up with just a 4.46 star rating. That is indicative of a product that has recently had some problems – but that otherwise has had a good track record.
It tracks your mileage automatically using GPS so you no longer need to keep a mileage log or logbook — all you need to do is let the app record your trips in the background and swipe which trips are for business. They also have a cloud service where you can upload photos of your business-expense receipts to their web servers. The app is designed for minimal battery consumption and IRS compliance.
However, there is a little oddity on their app store description where they say, “Everlance is currently 100% FREE and comes with unlimited cloud storage.”
But if you go to their website you find out it’s 100% free only if you’re willing to accept minimal capabilities. And part of those minimal capabilities is the fact that they will only allow you to track up to 30 trips per month. And that is obviously not going to work for Uber drivers.
If you want access to the functionality that you’ll actually need, you’ll have to pay either $60 per year (upfront) or $8 per month (which equals $96 per year).
While they have an excellent rating at 4.8, several of their customers have complained that it doesn’t always automatically start recording trips and they have to login manually each time to check and make sure it’s recording properly. Several other reviewers have said they’ve also had trouble with it not keeping proper track of the receipts they’ve uploaded.
Here is one review where the reviewer summed up concisely what several others said:
“The app often merges multiple trips, loses others, and 7 times out of 10 tracks miles as the crow flies and not by the route traveled. NOT RECOMMENDED.”
The app developers of MileBug have apparently spent a lot more time working on the iOS version than the Android version. The Google app store has them rated at 3.3 while the Apple app store has them at 4.2. And the Android customers have serious complaints. Like the complaint many Android users have aired saying that the app doesn’t backup or export data properly.
Other users complain that the iOS data isn’t compatible with the Android version so users can’t switch back and forth between both types of devices, which seems to kind of defeat one of the major reasons for making an app available for both devices.
A lot of complaints among Android users as well, saying the app hasn’t been significantly updated or improved for at least a year and a half. And as you can see by the screenshot, it’s not one of the most attractive mileage apps on the market. It is a generation or two behind design-wise.
Some distinctive things this app supposedly does that some of the others don’t, is it allows you to track mileage for multiple businesses and automatically detect when you’re in a different car.
However, the one big thing most of the other apps do that this one doesn’t is automatically track your mileage.
Auto tracking is when these apps can automatically detect when you’re in a moving vehicle. If you have the app on when you get into a car, they will automatically detect that you’re moving and start tracking your mileage. It’s a feature that has been around for a long time and kind of a must-have feature in 2018 for mileage trackers. But with the apparently buggy MileBug, that feature is missing.
On Android they’re only reporting 10,000-50,000 installs which is significantly fewer than some of the other better rated apps. It’s not a good sign and indicates they may not be around to support it for the long-term.
We recommend staying far, far away from this app! But in case you’re curious anyway, here’s their pricing:
MileIQ is owned by Microsoft and is included with Office 365 Business Premium subscriptions. So if by chance you happen to have one of those subscriptions, you can use this app at no additional charge. If you don’t have the subscription it’s a little pricier than some of the other apps.
This app will do a solid job recording your miles but it comes with several annoying design quirks that might make it a bit of a headache. One, you can’t view your miles by day. You can only view them by month. So, if you have a job that requires you to keep track of your miles by day, this won’t work for you.
Another annoyance is that there are only two ways to view your reports. They can be emailed to you or you can view them online through a desktop web browser. This is odd as I know this has been brought to their attention as a frequent complaint as far back as two years ago. But they still haven’t done anything about it.
Apparently, they see no need for drivers to be able to view their reports through the app – which is obviously the most convenient way to view them when you’re on the road. It’s nice to have the desktop web access too for those times when you want to see everything on a larger screen. But come on MileIQ! Give us in-app access to our reports. Most of the other apps do.
Another problem is the map it shows your route on is sparse, to say the least. No landmarks or buildings are labeled on the map so it can be hard sometimes to figure out where you’ve been. You might end up having to manually type in addresses on Google Maps to figure out where you were.
If none of those issues bother you, this would be a relatively solid app otherwise. It doesn’t get our highest recommendation, but not the worst either.
I was all ready to love MileWiz because they have nifty graphics! But great graphics apparently don’t necessarily make for a great app!
When I stumbled upon MileWiz in the app store I was actually shocked to see their rating on iTunes was 3.4 and on Android 3.5. It left me curious to find out how could an app that looks so good be so bad!?
But first, MileWiz is the only mileage tracker that makes the bold claim that it will protect you against an IRS audit. If by that they mean having tracked your miles will protect you from an audit then maybe they’d have a point. But the IRS has a thousand reasons why they may audit somebody and not having your miles tracked by an app is probably way down on the list.
MileWiz claims to “auto-track” which means its tracking starts automatically once it detects you’re in a moving vehicle. This is a great feature… when it works. But if it doesn’t work it can really mess you up on tracking your miles.
All of the reviewers on iTunes said they had issues with the automatic tracking initiating. Two reviewers said that it started having problems because of billing issues. And it took both of them a long time to get the billing issues resolved. During that time they had no mileage tracking – which will kinda ruin your day if you’re relying on it to save big on your tax bill.
With that all said, you can guess that we’re not going to recommend this app. There are better ones, and better ones that cost less.
QuickBooks Self-Employed (QBSE) is made by the largest company of all these mileage trackers. You’d think that would be an advantage, but in the case of QuickBooks – not necessarily. The problem? Their support. It’s widely known to be horrible. If you have a problem with this mileage tracker, it’s going to be nearly impossible to get any help.
And plenty of people have had problems with it. It has consistently had problems with the mileage tracking initiating. People have lost many miles of deductions because of this problem. It has also had a known problem where it won’t track trips over 100 miles.
Since this is a QuickBooks app, you might expect it to focus heavily on the financial aspects of a small business – and you’d be right. That is its primary purpose – to keep track of income and expenses. It connects to banks and downloads all your transactions for record-keeping and accounting purposes. At the end of the year all of this is fed seamlessly into Intuit’s TurboTax which then generates your tax returns.
Mileage tracking seems to have been thrown in as an after thought judging by the number of complaints. Most of the complaints about this product focus mainly on the mileage tracking functionality. So, that appears to be the weakest aspect of QBSE.
QuickBooks Self-Employed Pricing:
SherpaShare Rideshare Driver Assistant
This is the one app that is specifically developed for Uber and Lyft drivers. SherpaShare has been involved in developing products specifically for Uber and Lyft drivers since their inception. This app is an extension of that and includes many rideshare-specific features that the other apps have never even thought of!
For instance, the SherpaShare app connects you to a community of other drivers so you can chat and get real-time information on working conditions in your area.
They also advertise a feature they say will give you optimal routes that result in more pings. When I tried this feature, however, it didn’t really seem to work in a sensible way. This feature is really dependent upon how many other SherpaShare drivers there are in your area.
Speaking of dependence on other drivers who are signed up with SherpaShare, several of their best features are tied to that. If there are a lot of SherpaShare drivers in your area, then you can really get a lot of benefit out of these features.
But if there are none or only a handful, then these features won’t be of any use. However, they have between 50,000-100,000 Android installs and they say it’s used by more than one hundred thousand drivers, so perhaps when you add the Android installs to the iOS installs it comes to well over a hundred thousand.
That means if you’re in a big city, you should probably get some decent benefits from their shared features.
SherpaShare can also do other nifty things since it is designed specifically for rideshare drivers. For instance, it can be integrated with your Uber and Lyft accounts and tell you how much you’ve earned per mile driven. And it gives you nice graphs and charts showing how you’re doing this week compared to last.
They have very good reviews on Android (4.5) and similarly good on Apple (4.2). They have a handful of complaints about getting no response for support.
Their description of this plan is a little nebulous. They give you access to “an exclusive list of deals and promotions worth thousands” but they don’t give any hint as to what kinds of products those deals are on. They give you access to a “dedicated driver office hour”, but they don’t give any information on what exactly that is.
Not just unlimited mileage tracking… but all plans also include something they call, “ping maximizing tools” and driver-to-driver communications. You won’t find that anywhere else!
This app advertises all the basic functions you need in a mileage tracker. But, it is not specifically designed for rideshare drivers, so you won’t find some of the customized features a few of the other apps have.
While they claim to have auto-trip detection, we’ve seen many reviews that noted it was spotty at best. One reviewer for the Android version said “Auto tracking detection is hit or miss. Sometimes it asks, other times it asks late, today so far it hasn’t asked at all.” This sentiment was mirrored by other reviewers.
One thing StrideDrive lacks is a widget that you can put on your screen where you can instantly check its status and turn it off or on in case the auto-detection didn’t work.
When auto-tracking isn’t working in Stride, drivers have to actually open the app and turn it on. In fact, they have to open it just to make sure it’s working. It would be a lot easier if they could simply view a widget on their home screen.
One essential missing feature is they don’t give you a way to distinguish between personal and business mileage. Most of the other apps have this feature and we consider it essential.
While the app keeps track of other expenses besides mileage, they have a $1,000 limit on any single expense. So, if you incur a business expenses that’s more than $1,000, the app simply won’t accept the expense. In fact, even worse, it will make you feel bad for trying to enter it! It will flag it and call it a “false expense”!
This app is made by Stride Health – which is a company that helps people find health insurance plans. It’s free to use and it is paid for by the fact they put ads for their health services on the app. The fact that it’s made by a company far outside of the rideshare world and which doesn’t have a background in finance and taxes probably explains some of the glaring holes found in this app.
This app is missing one significant feature and that is trip auto-detection. That means every time you want to track your mileage you’d have to manually open the app and tell it to start the trip. Then you’d have to remember when the trip ends, to end the trip. Believe me, it may not sound like a big deal, but it is. You don’t want to have to pay that much attention to it.
The point of these apps is so that you can do other more worthwhile things while they worry about tracking your mileage.
This app has probably about the worst ratings we’ve seen on any app. It’s at 3.9 in Google’s PlayStore (it’s not available on iTunes).
When we look at what some of those reviewers say, it’s not good there either.
Many reviewers claimed that the mileage was off. Well, you can expect it to always be off a little bit with these apps – usually by a few tenths of a mile. But one reviewer said for them it was off anywhere between 10 to 60 miles!
Most disturbingly though is something several reviewers mentioned. We wouldn’t have mentioned it here if we had only seen it once. But we saw several reviewers mention this over a period of three different years. So, it bears mentioning. They said they felt cheated when they used the app all year, only to find out they had to pay $10 (in previous years) and $30 (in recent years) to download their information for tax season.
Apparently, whatever these developers are doing, they’re leading people onto believing it’s all free and then they surprise them with a big charge ($30) at the moment when they are most desperate for the information.
It may sound like a smart marketing tactic, however, no other company uses this kind of tactic. They all tell you it’s this much a month or this much a year. But this company apparently lets people have full access to all features all year long, so they have no way of knowing there’s a charge for anything. The $30 charge in itself isn’t terrible. It’s a fair charge for storing people’s information on their servers all year, but it would have been much more honest if they had just said, ‘it’s $3 a month’ or ‘$30 a year’.
They don’t tell you on their website what the paid plans offer that the free plan doesn’t. But, if we were to follow what many reviewers said, we are led to believe the paid plan simply includes the ability to download your mileage info for tax purposes each year. They are very unclear about this to their customers.
Mileage Tracking FAQ
To conclude this guide, let’s address some common questions about mileage tracking and mileage tracking apps.
1. Do I need to separately track my miles for Uber and Lyft?
No, there’s really no need to do this. From the perspective of the IRS, all your independent contractor jobs and income streams fall under the “umbrella” of one business. All your mileage expenses, then, apply to your self-employment taxes, and there’s no need to track them as if they were for separate businesses.
2. Is the cost of my mileage tracking app tax deductible?
Most likely, yes. The cost of software or apps that you use for your business is a deductible business expense. Of course, you should always consult an accountant just to be certain (we’re not accountants or tax lawyers, so we cannot offer you any tax or other legal advice).
3. Does using a mileage tracking app protect me from an IRS audit?
There is no way to guarantee protection against an audit, but using a mileage tracking app and keeping detailed records will help decrease the chance that the IRS audits you because of a suspicious-looking return. And if you do get audited, the detailed records in the mileage tracking app will help you prove that all your deductions comply with tax law.
4. What is the modified accelerated cost recovery system (MACRS)?
The modified accelerated cost recovery system (MACRS) is the system that U.S. tax law uses to calculate the annual deductions for depreciation of an asset (car, house, computer equipment, etc.).
Generally, this is not relevant to you when deducting driving expenses unless you’re using the actual expense method. We highly recommend you use the standard mileage rate instead, but you can learn more about MACRS and the actual expense method here.
5. What is a fixed and variable rate (FAVR) plan?
A fixed and variable rate (FAVR) plan is a common method that employers use to determine the reimbursement rate for employees who use their personal vehicles for business purposes. Because gig economy drivers are independent contractors, the FAVR plan isn’t relevant to you.
The only thing you need to know is that independent contractors do not receive mileage reimbursements of this sort (for most common rideshare and gig apps). This is why it’s so important to track your mileage and claim the mileage deduction when filing your taxes. Since you’re not getting reimbursed, you might as well at least pay lower taxes in exchange for your out-of-pocket expenses.
Track Your Miles to Lower Your Tax Bill Today
The language surrounding mileage tracking and the mileage deduction can be complicated, sometimes to the point that it doesn’t even seem like it’s written in English.
With the right mileage tracking app, however, you don’t have to worry about the technical jargon and subtleties of the tax calculations. All you have to do is drive, classify your trips, and then hand the expense report to your accountant to square away at tax time. Instead of the dreaded feeling of filing your taxes, you get to have the amazing feeling of saving money.
To learn more about how to get your maximum tax deductions, check out our guide to tax deductions for Uber and Lyft drivers. For an overview of the tax filing process as a gig economy worker, check out our guide to self-employment taxes.