The IRS has announced the 2023 optional standard mileage rates used to calculate the deductible costs of operating a vehicle for business, charitable, medical, or moving purposes.
Background: If you use a vehicle for business driving, you can generally deduct the expenses attributable to your business use. This includes expenses such as gas, oil, tires, insurance, repairs, licenses, and vehicle registration fees. In addition, you may claim a depreciation allowance for the vehicle based on the percentage of business use. However, annual write-offs are subject to so-called “luxury car” limits, indexed annually.
But some taxpayers want to keep track of only some vehicle-related expenses. Another option: Instead of deducting your expenses, you can use the IRS’ standard cents-per-mile rate. With this approach, you don’t have to account for your expenses. However, it would be best if you still recorded the mileage for each business trip, the date, the destinations, the names and relationships of the business parties, and the business purpose of the travel. The rate is adjusted annually by the IRS.
Beginning on January 1, 2023, the standard mileage rates for the use of a car (also a van, pickup, or panel truck) is:
- 65.5 cents per mile for business miles driven. In 2022, the business rate for the second half of the year (July 1-December 31) was 62.5 cents per mile, and for the first half of the year (January 1-June 30), it was 58.5 cents per mile.
- 22 cents per mile driven for medical or eligible moving purposes. In 2022, the rate was 18 cents per mile for the first half of the year and 22 cents per mile for the second half.
- 14 cents per mile driven in service of charitable organizations. (This amount is set by law and remains unchanged from 2022.)
Important: Under the Tax Cuts and Jobs Act, taxpayers can’t claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers cannot claim a deduction for moving expenses unless they’re members of the Armed Forces on active duty moving under orders to a permanent change of station.
The standard mileage rate for business, medical and moving purposes is based on an annual study of the fixed and variable costs of operating an automobile. This includes gas, maintenance, and depreciation.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
If you have questions about deducting mileage expenses in your situation, consult with a Reynolds + Rowella tax advisor today.
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