The IRS mileage rate is an important number for anyone who uses their vehicle for business purposes. Here’s some good news if you’re claiming an IRS mileage deduction: On January 1, 2023, the IRS increased its mileage rate for vehicle operating deductible costs by three cents per mile.
Employees and independent and self-employed taxpayers can deduct the cost of using their personal vehicles for business purposes on their tax returns. Employers who grant their workers mileage reimbursement may also claim this expense as a tax-deductible business cost.
Mileage reimbursement extends to all costs of operating a personal vehicle for business. This deduction works with standard per-mile rates, which is the simplest way to claim IRS mileage. You may also keep track of your actual expenses and claim these as deductible, but this method requires significantly more time and effort.
Mileage deduction applies to cars, pickups, panel trucks, and vans, whether gasoline- or diesel-powered, EVs, or hybrid vehicles.
The 2023 deductible IRS mileage rate is:
The current business mileage rate is a significant three-cent increase from the midyear increase the IRS implemented in June 2022. The previous standard IRS mileage rate was 62.5 cents/mile, which was itself an increase from the 58.5 cents/mile the IRS set at the beginning of 2022.
According to the current calculations, for every 100 miles you drive for business purposes, you’ll be able to claim a return of $65.50.
According to IRS rules, business mileage is any distance you drive for work. Qualifying work trips include:
Mileage reimbursement doesn’t count as an employee benefit and, thus, isn’t taxable. However, if the reimbursement surpasses the standard IRS mileage rate, excess amounts begin to count as taxable income.
If your employer chooses a reimbursement method other than the standard mileage rate, like a mileage allowance or a fixed and variable rate, these payments must not exceed the standard rate, or they’ll become taxable.
Note that employees can only claim business mileage as a tax deduction if their employers reimburse them. You’ll also need to provide clear business mileage records.
To make sure you claim an accurate number on your mileage deduction, log and save this information:
Save these records as soon as possible after the trip to make it easier to calculate your total annual business mileage. Pay attention to your records to separate business trips from personal driving using the same vehicle. You can use a mileage tracker for easier recordkeeping.
Understanding the IRS mileage rate is just one part of your tax requirements. Avoid tax pitfalls and save time, money, and energy by working with Levy & Associates, a full-service accounting, tax resolution, and audit defense firm with over 20 years of practice. Our talented team includes tax attorneys, former IRS officers, and qualified CPAs.
Call 800-TAX-LEVY or contact us online to learn more about our full range of tax services.
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