The IRS mileage rate deduction informs business owners and self-employed individuals how much they can deduct for business-related driving only. In 2023, the rate is 65.5 cents per mile, the highest it's ever been. This is three cents higher than it was from June through December of 2022 at 62.5 cents per mile.
Why did the IRS make this adjustment, and what can business owners do about it? Let’s find out.
The short version
- The IRS sets a certain amount each year that businesses can use to calculate their exact mileage deduction. For 2023, it’s 65.5 cents per mile.
- Those who drive for medical appointments and charity events also qualify for a limited deduction.
- Halfway through the year, the IRS raised the mileage rate to accommodate rising gas prices.
What is the IRS mileage rate for 2023?
At the beginning of the year, the IRS announced the mileage rate for the mileage tax deduction.
- As of 2023, the mileage rate is now 65.5 cents per mile. This is an increase of three cents.
- For the first half of 2022, the rate was 58.5 cents per mile and for the second half, it was 62.5 cents per mile.
Individuals who are reporting this deduction will have to factor this change into their calculations come tax time. We'll show you how further down.
Which miles count as a tax deduction?
Unfortunately, everyday commuters can’t deduct their daily trips to the office. This deduction was designed mainly for business owners that drive frequently for business purposes.
Here’s who can consider deducting their mileage for business:
- Small business owners and self-employed individuals.
- Independent contracts such as rideshare drivers.
- Employees of small businesses that drive company vehicles.
- Active-duty military members traveling during duty.
- Drivers traveling specifically for volunteer work or medical reasons.
Read more: 10 best self-employment tax deductions to take in 2023
What counts as “business” mileage?
Generally, any driving that helps the business owner perform necessary business counts as business mileage. This can be trips to visit clients, going back and forth between jobs, or driving passengers (in the case of a rideshare driver). There are nuances to what qualifies and what doesn’t. The IRS has specific guidelines on what qualifies as a business mileage deduction.
Exemptions from the IRS mileage rate
Not every ride follows the 58.5, 63.5, or 65.5 cents per mile rate. Certain types of drives have lower mileage rates, including:
If you’re driving for medical purposes
Businesses aren’t the only ones that qualify for a mileage deduction. If you have to drive for medical purposes you may also qualify for a deduction. If you’re driving yourself to your doctor, hospital, or other medical care provider, you can deduct 22 cents per mile in 2023 (18 cents per mile for the first half of the 2022 tax year and 22 for the second half).
Additionally, if you’re driving your child or another person to frequent medical appointments, you can deduct the same 22 cents per mile. And if visitation is recommended, anyone driving to visit a mentally ill patient can qualify for the same deduction.
This deduction doesn’t always make sense for those who go to one appointment a year, because you’ll never get enough of a deduction to opt out of taking the standard deduction. For those who frequently see the doctor, though, this deduction can help reduce the burden of getting to and from your appointments.
If you’re claiming moving expenses as an active military member
Active military members that move from post to post can claim this under the IRS mileage rate deduction. They’ll get the same 22 cents per mile rate in 2023 as those receiving medical care. Only active duty military members qualify for this moving expense mileage deduction, and the move must be related to military service.
More: USAA federal savings bank review 2023 – full-service banking for military families
If you’re performing charitable services
Do you use your car to help a charity or go to charitable events? All the mileage you accrue to do charitable work can be deducted, as well as parking fees and tolls. You can deduct 14 cents per mile for this type of travel as of 2023.
Why was the 2022 mileage rate adjusted?
Typically, the IRS sets the mileage rate for the full year, but last year they opted to adjust it partway through the year in June. In a statement they released, they noted the increase in gas prices as the driving factor behind the change.
“We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate,” said IRS Commissioner Chuck Rettig in the statement.
Gas prices skyrocketed in early 2022, reaching an average price in June of over $5/gallon across the country. This put an unexpected burden on all drivers, but especially those who needed to travel in order to do business.
In addition to raising the basic business mileage rate by four cents, The IRS also adjusted the rate for deductible medical or moving expenses (for military members only) to 22 cents per mile. This is the same rate for 2023.
How to track your miles for taxes
Keeping track of your business mileage can be as complicated or as simple as you’d like. For some, the easiest thing to do is keep pen and paper handy in your car and record your daily or weekly mileage in it.
Additionally, there are tons of apps to choose from that do the work for you and track your mileage automatically. A few of the most comprehensive apps include:
- Everlance – Everlance is an all-in-one business app. It tracks your miles automatically through GPS, but also comes with expense tracking and an automatic tax savings feature that lets you connect to your bank and put a percentage of your income aside for taxes.
- Stride – Stride is a free app that automatically logs all of your mileage. It also comes with basic spend tracking so you can keep track of all your business receipts.
- MileIQ – MileIQ tracks your location and car’s mileage and even recognizes frequent trips that will automatically be classified as business expenses. You’ll pay $59.99/year to use the unlimited service.
- Quickbooks – If you use Quickbooks Self-Employed, there’s an automatic GPS feature that’ll track your car’s movements and record your mileage. You can even classify miles as personal or business if you use your car for both. (Read our full review of Quickbooks).
How to claim the standard mileage deduction
There are multiple ways the IRS allows you to earn a deduction on your business mileage. You can either opt for the standard deduction or deduct your actual expenses such as gas, oil changes, etc. The standard mileage deduction is definitely easier to track and, depending on how much you drive, could equal a larger deduction.
Here's how to calculate your mileage deduction for the 2022 tax year:
Standard mileage deduction
The standard mileage deduction is simple. All you have to do is keep a record of how much you drive in a year for business and then multiply that by the mileage rate set by the IRS (58.5 or 62.5 cents in 2022). You’ll then report this on Form 2106: Employee Business Expenses.
While it’s an easy calculation, what exactly counts as a business driving can be complicated, so it’s best to run your numbers by your accountant or tax preparer, if you have one. And don't forget to continue tracking your miles for this year to make taxes easier next year.
More: How to find a professional tax advisor
What declaring mileage looks like in practice
John owns a construction company and uses his Ford F150 solely for business purposes. Since he drives so much for work during the year, he definitely plans on taking a deduction come tax time. He keeps track of all of his business miles on MileIQ on his phone and finds that he drove 4,000 miles through the whole year in 2022: 2,000 in the first half and 2,000 in the latter half of the year.
He’ll use both the initial mileage rate of 58.5 cents plus the 62.5 cents per mile adjustment to figure out how much of a deduction he can take.
He can calculate his deductions by multiplying his miles by the corresponding rates.
For the miles he drove in the first half of the year, the calculation looks like this:
2,000 x 0.585 = $1,170
And for the remainder of the year after the adjustment:
2,000 x 0.625 = $1,250
He would then add the two numbers together to find out his overall deduction for the year. When filing in 2023, he can deduct $2,420 from his earned income for 2022.
If you don’t drive a lot, but you still put a lot of wear and tear on your vehicle due to simply running your business, you can find your deduction using the “actual expenses” method. This method considers all of the costs associated with your vehicle besides mileage. This can include:
- License costs
- Lease payments for your vehicles
- Registration fees
- Fueling up
- Oil changes
- Business insurance costs
- Tire replacements
- Parking fees
Again, all of these costs must be related to your business. If you use your car as a personal vehicle as well, you can only deduct the percentage your business uses the vehicle for.
When will the IRS mileage rate for 2024 be announced?
Each year, the IRS releases the next year’s mileage rate in December. So, you can expect to see next year’s numbers around then. 2022 was a unique year, as there are rarely adjustments to these rates throughout the year. It remains to be seen if there will be a mid-year adjustment in 2023.
The takeaway: who can take the mileage deduction (and how)?
In an effort to combat rising gas prices, the IRS made a mid-year adjustment to the mileage rate deductions in 2022, raising it to 62.5 cents per mile. In 2023, this rate has been adjusted again to 65.5 cents per mile. If you drive a vehicle frequently for business purposes (not daily commuting), you can qualify to take this deduction.
Thankfully, claiming the deduction is easy! Just be sure that every mile you’re claiming is, in fact, for business purposes. If you're uncertain, work with an account or tax preparer that knows all of the ins-and-outs of IRS deductions.
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