IRS Mileage Rates for 2023
Are you a frequent driver for your business, medical purposes, or a charity?
On Dec. 29, 2022, the IRS announced the 2023 optional standard mileage rates, which are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
The 2023 standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 65.5 cents per mile driven for business use, up three cents from the midyear rate increase for the second half of 2022;
• 22 cents per mile driven for medical purposes or for moving purposes for qualified active-duty members of the Armed Forces, unchanged from the midyear rate for the second half of 2022; and
• 14 cents per mile driven in service of charitable organizations. The rate is set by statute and remains unchanged from 2022.
Under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. For some, keeping track of gas receipts, maintenance receipts, and other car upkeep items is the way to go. But for many, the hassle of keeping track - and still being able to produce the proof if you're audited - isn't worth it. The standard mileage rates are designed to average out the costs of fuel, maintenance, and other upkeep so you don't have to keep track of the reciepts - just your mileage.
Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.
The key factor in using the standard mileage rate is being able to prove your mileage if you're audited. One good way is selecting an electronic application that monitors your trips and lets you classify each as business, personal, et cetera, but you could go the old-fashioned pen and paper route as well. So what constitutes a good mileage log? According to companymileage.com, your mileage log must be able to prove:
The amount: the number of miles driven for each business-related trip.
The time: the date and time you take each trip.
The place: the destination for each business-related trip.
The business purpose: the business-related reason for traveling to this location.
Therefore, each entry in a mileage log should include the date, the destination, the business purpose, the odometer reading at the start and end of travel and the total mileage for each trip.
As we round the corner of the new year into tax time, it's important to consider what we can claim for last year, and how we can better prepare for this year. Make sure you know the credit you'll get for your miles this year and keep good records so in the event of an audit, you're covered!
This Legal Update is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.