If you deduct your vehicle mileage for business purposes, you will want to be aware of new standards going into effect. The IRS released new standard mileage deduction rates for 2023.
If you have already met the requirements for deducting your vehicle for your business, you’re ready to calculate your mileage and standard deductions based on the new rules. If you’re unsure if the miles you’ve driven are deductible, below is a quick review of what qualifies as business mileage.
How Do I Know If Miles Are Deductible?
To qualify as deductible miles, you must calculate the miles driven in the vehicle for business purposes, including travel. Transportation miles – driving between your workplace and home on your regular commute – are not deductible.
If you work from home, any miles driven in pursuit of your business are deductible because there is no commute.
Recordkeeping of mileage and purpose of trips is essential if you are taking a deduction for your vehicle. Deductions differ based on whether you are calculating standard or actual mileage and based on who owns the vehicle – a company, the business owner, or an employee.
Consult with your tax advisor to ensure you address your specific situation.
What Kind of Business Vehicle Deductions Are There?
The IRS specifies three kinds of vehicle mileage deductions, each with a different rate of deduction per mile. The types of vehicle deductions are:
- Business mileage
- Medical and moving mileage
- Charitable mileage
New Standard Mileage Deduction for 2023
For the entire year, the business rate is 65.5 cents per mile. The maximum charitable, medical, and moving mileage deduction rates for 2023 are the same as that for 2022, but the rate for business mileage increased by 3 cents.
In 2022, the rate differed depending on whether you were driving the vehicle in the first or second half of the year. The IRS raised the deduction in the second half of 2022 to help offset the cost of higher gas prices on businesses.
The IRS increased the business rate again for 2023 and will be the same for the entire year.
The IRS stated they increased the deduction based on the costs of operating a vehicle for business purposes. The deduction rate is the same regardless of what type of automobile is in use – gas, diesel, electric, or hybrid.
More Money, More Miles
Whether you take the standard or actual mileage deduction for your vehicle, it is crucial to know how the increase in deduction affects your business’s expenses, especially when you have lots of business travel to keep track of.
To ensure your company takes full advantage of all possible tax deductions and credits, consult a business and tax professional such as a Certified Public Accountant or Enrolled Agent.