Understanding the IRS mileage rates is crucial for taxpayers looking to deduct vehicle mileage for business, charity, medical, or moving purposes. However, navigating the various rules and regulations is essential to ensure compliance and maximize deductions.
If you use your vehicle for business purposes or intend to accumulate mileage while volunteering this year, you may qualify to deduct some of those miles on your tax return.
To be eligible for this deduction, the miles must be driven for qualifying business, medical, moving, or charity purposes, and you may need to itemize on your return to claim the tax break. These rates apply to electric, PHEV, gas, and diesel-fueled cars.
IRS Mileage Rates for 2023
For tax years 2023 (taxes filed in 2024), the IRS standard mileage rates are as follows:
- 65.5 cents per mile for business.
- 14 cents per mile for charity.
- 22 cents per mile for medical and moving purposes.
IRS Issues Mileage Rates for 2024
On December 14, 2023, the agency announced the optional mileage rates for the upcoming tax year. Business rates will increase by 1.5 cents, charity miles will remain the same at 14 cents per mile, and medical and moving miles will decrease by 1 cent.
- 67 cents per mile for business.
- 14 cents per mile for charity.
- 21 cents per mile for medical/moving.
IRS Standard Mileage Rate for Business
If you’re self-employed or work as a contractor, you may qualify to deduct the expenses related to using your car for business purposes, as per the IRS standard mileage rate for business. However, the eligibility of your tax deduction relies on how you utilize your vehicle. Typically, commuting to work doesn’t count as deductible mileage. Still, you might be able to claim mileage for business-related trips, such as visits to clients, meetings, or temporary workplaces.
You have the option to deduct standard mileage using the rates provided by the IRS or actual expenses (like repairs, depreciation, gas, etc.), but you can’t claim both. However, expenses for tolls or parking fees related to business use can be separately deductible, regardless of which deduction method you choose.
Comparing Standard Mileage vs. Actual Expenses for Business Deduction
When it comes to deducting vehicle expenses for business purposes, you have two options to consider:
Standard Mileage Deduction: This method offers simplicity by multiplying your business miles by the IRS mileage rate. However, it requires meticulous record-keeping of your business-related mileage. To qualify for this deduction, you must own or lease the vehicle. It’s important to note that the rules for business mileage deductions can be intricate, especially if you utilize multiple vehicles for business purposes. For further guidance, you can refer to the IRS website for more information.
Actual Expenses: Alternatively, if you prefer not to track your mileage, you can opt to deduct the actual expenses incurred while using your vehicle for business. These expenses may encompass various costs such as depreciation, licenses, lease payments, registration fees, gas and oil, insurance, repairs, and tires.
Alternative IRS Mileage Rate Categories
IRS Standard Mileage Rate for Charitable Activities
If you utilized your vehicle to assist a charity or engage in volunteer work, you may be eligible to deduct the mileage. Additionally, parking fees and tolls incurred during these activities are deductible.
Should you prefer not to deduct your mileage, you can opt to deduct your unreimbursed out-of-pocket expenses, such as gas and oil. However, these expenses must directly relate to the use of your car in providing services to a charitable organization. It’s important to note that you cannot deduct repair and maintenance costs, depreciation, registration fees, tires, or insurance premiums.
IRS Standard Mileage Rate for Moving
Only active-duty members of the military are eligible to deduct mileage related to moving. This move must be associated with a permanent change of station.
IRS Standard Mileage Rate for Medical Purposes
If you utilized your car for medical reasons, you may qualify to deduct the mileage. Examples of medical reasons include driving to medical appointments, hospitals, or other medical facilities, transporting a child or dependent for medical care, and visiting a mentally ill dependent as part of their treatment plan. Similarly, parking fees and tolls incurred for medical purposes are deductible.
Alternatively, if you choose not to deduct your mileage, you can deduct unreimbursed out-of-pocket expenses like gas and oil. However, these expenses must be directly related to the use of your car for medical purposes. Notably, repair and maintenance costs, depreciation, and insurance premiums are not deductible.
It’s worth mentioning that mileage is not the sole transportation cost that may be eligible for deduction as a medical expense. For detailed information, you can refer to IRS Publication 502. Additionally, it’s important to note that, in general, you can deduct qualified, unreimbursed medical expenses that exceed 7.5% of your adjusted gross income.
How to Utilize IRS Mileage Rates for Tax Deductions
When claiming tax deductions for mileage related to moving, medical, or charitable purposes, you’ll need to itemize on your tax return to avail of the deduction. Itemizing requires allocating additional time during tax preparation to complete tax forms such as Form 1040 and Schedule A, along with any supporting schedules associated with them.
For self-employed individuals, the mileage deduction is claimed as a business expense on Schedule C. If you opt for online tax filing, the software will prompt you about your mileage during the interview process and automatically calculate the deduction for you.
Tracking Your Mileage
Maintaining a record of your mileage is crucial as it may be required to substantiate your deduction in case of an audit.
There are numerous methods to track your mileage. While a pen and paper stored in the glove compartment can suffice, a quick search on Google or your phone’s app store will unveil various tools designed to streamline this process.
If you find yourself in need of assistance with your bookkeeping needs, don’t hesitate to reach out to us at PVM Accounting. Our team of experienced professionals is dedicated to providing tailored solutions to help you manage your finances effectively and efficiently. Contact us today to learn more about how we can support your business’s financial success.
This post is intended for informational purposes only and should not be construed as legal, business, or tax advice. It is recommended that individuals consult their own attorney, business advisor, or tax advisor regarding any matters discussed in this post. PVM Accounting bears no responsibility or liability for any actions taken based on the information provided herein.
