Mileage Tracking for Gig Economy

Food delivery has been around for a while, but the rise of modern platforms coupled with COVID-19 safety concerns have grown the popularity of food delivery services immensely. Just since 2017, the global revenue for online food delivery has nearly doubled. And by 2024, it’s expected to reach around 97 billion U.S. dollars worldwide, according to Statistica.com.

With a heightened demand for food delivery, more drivers are needed in order to complete the growing amount of orders. As new drivers sign up to work for DoorDash, Uber Eats, GrubHub, Instacart, and so on, they are often unaware of helpful tips and tricks — like enhanced location data and mileage tracking apps — that will help them make more money.

Mileage tracking may sound like tedious record-keeping, but technology’s made it easy for drivers. With multiple free apps available, drivers should no longer miss out on the tax deductions offered through accurate mileage tracking.

Benefits of recording business miles

The main reason drivers should track their mileage is for tax deduction purposes.

Delivery drivers watch their mileage climb up and up every work day. Gas and car maintenance costs add up quickly. Tax deductions help ease the burden of these costs and increase their financial gains while working as a gig driver.

Unfortunately, not that many drivers take advantage of mileage deductions. In a survey conducted by One Hundred Feet Inc., 1200 delivery drivers were asked if they track miles for work. Only a little over half (56%) answered yes. Of those who do, a mere 60% use an app to track their miles, while 40% depend on Excel or paper logs to keep an organized record.

Drivers who rely on manual methods of tracking their mileage spend time organizing and recording their miles when they could have an app do the work for them. Mileage tracking apps also prevent drivers from accidentally misplacing or losing their record.

How to get the biggest tax deduction

There are two ways a driver can calculate their work-related vehicle costs: standard mileage rate and actual expense.

To know which deduction is best, a driver should calculate both and see which one gives them the biggest tax deduction. This should be completed every year as some years actual expenses will produce a larger tax deduction and in others the standard mileage will be more beneficial.

1) Standard mileage rate

The standard mileage rate hinges on the yearly rate set forth by the IRS. For 2021, the IRS allows a 56 cents claim per business mile driven. That means that for every 1000 miles driven, $560 can be deducted from a driver’s taxable income.

The standard mileage rate deduction is a straightforward and easy way for drivers to save money during tax season. One GrubHub driver on Reddit said:

I average 40–50k miles/year This industry only makes sense after you take your mileage deduction at tax time. It’s 50+ cents per mile. So if you have a $10,000 car and get 100k miles out of it, you get $50,000 in tax deductions.

2) Actual expense

The second method of calculating a mileage deduction is a bit more complicated than the first. The actual expense method requires drivers to figure out all the money they’ve spent in order to operate their vehicle for work purposes.

While this is not a comprehensive list, some actual expense costs a driver can include are:

• Lease payments
• Gas
• Oil changes
• Tire rotations
• Auto insurance
• Title, licensing, and registration fees
• Vehicle depreciation
• Brake pad replacements
• Other various maintenance work

Once these costs are added together, a driver must decide the percent of time they use their car for work vs personal use. That percentage is then multiplied by the total amount spent on operating their vehicle. To read more about how to perform this calculation, visit Turbotax.com.

It’s important to note that the IRS requires proof of receipts, mileage logs, and other documentation for anything used when determining deductions.

Keeping an organized record of expenses can be challenging, especially for the actual expense method. But, thanks to technology, tracking mileage is easier than ever.