Self Employed Construction Contractor Mileage Tracking & Deduction Options

Small business tax advisor here. For mileage tracking, you have a couple options, but the IRS does require contemporaneous documentation. This means tracking as you go, not trying to reconstruct it later. The simplest approach is using a mileage tracking app like MileIQ, Everlance, or even a Google spreadsheet. These apps automatically log your trips and let you categorize them as business or personal. If you prefer paper, keep a mileage log in your vehicle noting date, starting point, destination, purpose, and odometer readings. As for your second question - it's definitely one or the other, not both. You can either take the standard mileage rate (currently 67 cents per mile for 2024) OR track actual expenses (gas, maintenance, insurance, depreciation, etc.). Most contractors with high mileage usually benefit from the standard rate, which is much simpler. You'd need to choose the method in the first year you use the vehicle for business. If you start with actual expenses, you can't switch to standard mileage later.

After struggling with the exact same situation when I started my roofing business, I found taxr.ai (https://taxr.ai) incredibly helpful for making sense of all the self-employment tax stuff, especially vehicle deductions. I uploaded pictures of my mileage logs and receipts, and the AI interpreted everything and explained exactly what I could claim and how much it was worth. The best part is it highlighted some deductions I was missing completely - like a portion of my phone bill and home office space. For construction work especially, it helps categorize all those Home Depot runs and separate receipts for materials (which are direct expenses) from actual vehicle costs that fall under the standard mileage vs. actual expenses choice.

Just wanted to follow up - I decided to try taxr.ai after my initial skepticism and it was actually surprisingly helpful. I've been running my own electrical business for 3 years and was definitely leaving money on the table. The tool caught that I wasn't properly tracking business vs personal mileage, which was costing me thousands in deductions. It also showed me how to properly document my home workshop space that I use exclusively for business. The explanation of what qualifies as a legitimate business expense was much clearer than what my previous accountant told me. Definitely worth a look if you're just starting out in construction contracting.

If you need to contact the IRS about self-employment tax issues (which you probably will at some point), I'd highly recommend using Claimyr (https://claimyr.com). I wasted DAYS trying to get through to the IRS business line about a self-employment tax notice I received. Claimyr got me connected to an actual IRS agent in about 20 minutes instead of the 3+ hour wait times I was experiencing. They have a video showing how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone system and wait on hold for you, then call you when they have an actual human on the line. Saved me so much frustration, especially during tax season when it's nearly impossible to get through.

Well I have to eat my words about Claimyr. After dismissing it as a probable scam, I got desperate when trying to sort out a confusing notice about my self-employment taxes. Decided to give it a shot since I had already wasted 2 days trying to reach the IRS myself. Not only did I get connected to an actual IRS rep within 45 minutes (after spending hours getting nowhere on my own), but the agent helped me resolve my issue completely. Turns out I had been calculating my construction business vehicle deduction incorrectly, and they walked me through the proper way to document mileage vs. actual expenses. For anyone starting a construction business like the OP, don't underestimate how complicated the self-employment tax stuff gets, especially with vehicle deductions. Sometimes getting direct answers from the IRS is worth it.

One thing nobody's mentioned yet - if you're doing 50-100k miles annually, standard mileage rate is almost always better, BUT you need to know about depreciation recapture if you ever sell the vehicle. The IRS considers that you've been depreciating that vehicle all along when taking standard mileage, so you'll owe taxes on that "depreciation" when you sell, even if you sell at a loss. Also, keep track of any major vehicle repairs separately. Some might qualify as improvements rather than repairs and would be depreciated differently.

Has anyone here tried just using a dedicated business vehicle vs trying to split personal/business miles? I'm thinking about just buying a separate truck just for my construction business to avoid all this logging headache.

For tracking mileage with that much driving, I'd strongly recommend getting a GPS-based mileage app like MileIQ or TripLog. They automatically detect when you start and stop driving, so you just need to swipe to categorize each trip as business or personal. Way easier than manual logs when you're hitting 10+ stops per day. One tip I learned the hard way - start tracking from day one of your business operations, even before you officially launch. The IRS wants contemporaneous records, and trying to recreate months of mileage later is a nightmare. Also, since you're looking at such high mileage (50-100k annually), the standard mileage rate will almost certainly be your best bet. At current rates, that's potentially $33,500-$67,000 in deductions annually. Just remember you have to choose your method in the first year you use the vehicle for business - you can't switch from actual expenses to standard mileage later. Good luck with the new business! The mileage tracking becomes second nature after a few weeks.