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Tracking Mileage Deductions For Farmers

Tracking Mileage Deductions For Farmers

By Anne Miller and Paula Ledney

Mileage! Don't miss out on this valuable deduction.

Farmers, are you fully utilizing the mileage deduction?

"Take care of the pennies, and the dollars will take care of themselves.", wrote Benjamin Franklin many years ago, and this saying still holds today. One savings that farmers often overlook is tracking vehicle mileage as an expense deduction on their tax returns.

Let us review the standards. From the Farmers Tax Guide - IRS Publication 225 (2020): A farmer may take advantage of their vehicle usage in the following ways:

Actual Cost

This is the actual cost of operating a truck or car in your farm business. Only expenses for business use are deductible. These include gasoline, oil, repairs, license tags, insurance, and depreciation (subject to certain limits).


Instead of using actual costs, under certain conditions, you can use the standard mileage rate.  For 2020 this rate is $0.575, using up to 5 vehicles concurrently, and for 2021 the mileage rate is $0.56. The IRS typically updates the standard mileage rate at the end of each year, around the middle of December, so be sure to note the updated reimbursement rate.

Business use percentage

You can claim 75% of the use of a car or light truck as business use, without any allocation records, if you used the vehicle during most of the typical business day directly in connection with the business of farming. If you choose this method of substantiating business use the first year the vehicle is placed in service, you may not change to another method later.

How to decide which method to use is an excellent conversation to have with a seasoned tax professional. For this conversation, have your vehicle records and your past and current travel estimates compiled and ready.

Keeping good records will result in a good return on your taxes.  Here is where a little attention to detail will make a huge difference. By tracking your mileage on your multi-use vehicles, you can take the proper deduction on your tax return, which adds up quickly. Remember, Good Records equal a Good Return.

Excellence is a Habit

Excellence is a habit.  Good record keeping will be the key to maintaining this deduction. While tracking your mileage may be the last thing you want to do, your bottom line and accountant will thank you. Here are 3 effortless ways:

  1. Paper record – Keep a notebook in your vehicle and track your mileage using your odometer before you exit your vehicle. Keep track of dates, times, destinations, and mileage.
  2. Smart Phone – Many apps exist to track mileage, some for a monthly subscription and some for free. Be aware that nothing is truly free. A company that offers a free app may be gaining information from your data. However, for many, the convenience and benefit of the service outweighs the possible privacy risk.
  3. Computerized records – Most major accounting programs have a mileage tracker that connects to a map function, which can be helpful, especially if you do not know how far you traveled. You will need to enter the data directly, but many have a smartphone interface.

Again, from the IRS Publication 225 (2020), "Recordkeeping requirements. You must be able to prove your deductions for travel by adequate records or other evidence that will support your statement. Estimates or approximations don't qualify as proof of an expense."

Which recordkeeping system is the best for you? The one you can commit to using. An accountant or the IRS would be much happier to receive a good, concise handwritten travel log than no records at all. If you use your phone for other types of tracking, then the phone app may be the best for you. If you have an accounting program or someone who helps you with your records, add this as a weekly task. You will be glad you did.

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