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Do I need to track every trip or just business miles?

You only get a deduction for business miles, but you may need to track everything depending on how you use the vehicle.

If the truck or van is used for both personal and business driving, the IRS expects you to show what percentage was business. The only way to prove that percentage is to have a record of your total miles alongside your documented business miles. Without that, you can’t demonstrate that 80% of your driving was work-related. You’re just guessing, and guesses don’t hold up in an audit.

If the vehicle is used exclusively for business, tracking just the business miles is technically sufficient. But “exclusively” means no personal use at all. Not driving it to the grocery store on the weekend. Not lending it to your kid. If there’s any personal use, even occasional, you’re back to needing records of both.

For each business trip the IRS wants four things: the date, where you went, the business purpose, and the miles driven. “Drove to Home Depot” isn’t enough. “Drove to Home Depot to pick up materials for the Johnson remodel” is what they’re looking for. It doesn’t need to be a novel, just enough detail that someone reviewing it understands why the trip was business-related.

Commuting from home to a fixed office location doesn’t count as a business trip. But contractors often don’t have a fixed office. If you’re driving from home directly to a job site, that’s generally deductible mileage. Driving between job sites during the day is always deductible. Trips to the supply house, the permit office, or a client meeting all count. These add up fast for trade businesses, and vehicle expenses are often one of the largest deductions available.

The easiest way to stay on top of this is a mileage tracking app. MileIQ, Everlance, or even the mileage feature in QuickBooks will log trips automatically using your phone’s GPS. You review them periodically and swipe to classify each trip as business or personal. It takes a couple minutes a week and gives you a clean log at year end.

The manual approach works too. Keep a notebook in the truck and jot down the odometer reading, destination, and purpose before each business trip. Some contractors prefer this, and the IRS accepts handwritten logs as long as they’re recorded at or near the time of the trip. Writing down six months of trips from memory in March doesn’t count as a contemporaneous record.

The real cost of not tracking isn’t just a potential audit problem. It’s the deductions you lose. At the current standard mileage rate, a contractor driving 20,000 business miles a year is looking at over $13,000 in deductions. Without a mileage log, your tax preparer either has to use a conservative estimate or skip the deduction entirely. Either way you’re paying more than you should. Tax strategy only works when you have the documentation to back it up.

Start tracking now, even if it’s the middle of the year. A partial log is better than no log. And if your books haven’t been set up to capture vehicle expenses properly, our bookkeeping and tax services for contractors can help you get that squared away so nothing falls through the cracks at tax time.

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More Questions

Do I need to send 1099 forms to my subcontractors?

Yes, if you paid a subcontractor $600 or more during the year. You'll file a 1099-NEC for each qualifying sub and send copies to both the IRS and the subcontractor by January 31.

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Is it worth paying for bookkeeping when I'm just starting out?

In most cases, yes. Starting with clean books from day one costs far less than fixing messy records later. Even basic bookkeeping helps you track real profitability and avoid surprises at tax time.

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What should a contractor's invoice include?

A contractor's invoice should include your business and license info, project details, a clear breakdown of work performed, payment terms, and retention if applicable. Good invoices get you paid faster and keep your books clean.

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What's the best QuickBooks plan for a small service business?

QuickBooks Online Plus is the right fit for most small service businesses. It includes project tracking for job costing, handles multiple users, and supports the reporting that trades and service companies actually need.

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How do I invoice for a construction project?

Construction invoicing typically uses progress billing based on a schedule of values. You invoice at set milestones or percentages of completion rather than billing everything at the end of the job.

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How do I report subcontractor payments to the IRS?

You report subcontractor payments using Form 1099-NEC for anyone you paid $600 or more during the year. The form is due to both the IRS and the subcontractor by January 31. Collect a W-9 from every sub before you pay them.

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Long Beach CPA firm specializing in contractors, trades, and service businesses. Bookkeeping, tax preparation, IRS representation, and advisory services for businesses across the South Bay and Greater LA. Owned and operated by a CPA with over a decade of hands-on experience.

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