Yule log vs. Mileage log
December 5, 2020
We are deep into the traditional holiday season and seeking to spread extra cheer during the current Covid-19 pandemic. Spending the Thanksgiving weekend at home this year, I passed the time cutting and stacking wood instead of visiting with extended family and friends. I started picturing a couple pieces burning in woodstoves and open fireplaces as people share holiday celebrations. Naturally, Yule log came to mind, then call it an occupational hazard, I started wondering which would be more valuable and effective, a Yule log or mileage log.
The burning of the Yule log is a Christmas tradition where a piece of a specially selected log is burned each evening for a number of nights, then the remaining piece is saved for good luck and thought to provide protection. There are those who believe that as the fire burns, you can pay special attention, counting sparks for example and gain a further understanding of your fortunes to come during the new year and beyond.
The mileage log is a log of special significance too. I would contend it deserves to be considered an annual tradition as well, since it is prepared with detail and care each year and the results celebrated at the same time annually. The mileage log serves as the basis for meaningful tax deductions, especially for independent business owners like real estate brokers, contractors and other service-based businesses. Not only does the mileage log have significant impact for business owners, but it is also used for medical and charitable tax deductions.
Applying the business use percentage to vehicle expenses, including the purchase or improvement of vehicles is based on the results of the mileage log. A complete and accurate record will yield the greatest result for the business owner. Whether you decide to use the standard mileage rates provided by the IRS or use your actual expenses (see my prior post of life by default) to figure your deduction, the mileage log will be the primary supporting document for your deduction.
Uncertainty has been rampant during most of 2020 thanks in part to the health pandemic and being an election year. When needing to support a tax deduction, I would prefer to use the mileage log versus the Yule log. Counting sparks or discerning shapes from smoking embers is not a defense I feel very confident that the IRS Revenue Officer is going to accept when dealing with a tax problem.
Per IRS Publication 463, “Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place and essential character of the expense.” A mileage log should contain the date, destination, business purpose and odometer readings (total miles calculation). We have provided printed note pads with this information to our business owner customers in the past. There are also numerous apps you can use to document your mileage correctly. Both of those solutions seem more convenient than pulling out a charred piece of wood from under your bed.
When you find yourself spending more time at home or away from gatherings this holiday season, please take a moment to update your mileage log. The effort could yield a significant tax deduction and if you update your mileage log while burning a Yule log, you’ll gain certainty while celebrating a holiday tradition.
For more than 20 years, holding various financial leadership positions along the way, I have helped business owners stop overpaying their taxes. Through our proactive tax planning, you may be able to achieve your intended outcomes sooner with money that you would have spent on taxes you do not have to pay.
To learn more legal, tax-saving strategies for business owners, or get help with an IRS tax problem, contact me at (360) 474-5892 or e-mail me at tate@ensigncpa.com.