The mileage tax deduction, also known as the mileage expense deduction or the standard mileage rate, is a tax benefit provided by the Internal Revenue Service (IRS) in the United States. It allows individuals and businesses to deduct certain vehicle-related expenses based on the number of miles driven for eligible purposes. This deduction is primarily used by individuals who use their personal vehicles for business, medical, charitable, or moving purposes.
Here’s a comprehensive overview of the mileage tax deduction:
Eligible Categories:
- Business Mileage Deduction: If you use your personal vehicle for business-related activities, such as traveling to meetings, client visits, or driving for work purposes, you can deduct a portion of your vehicle expenses. The IRS sets a standard mileage rate each year (e.g., 58 cents per mile in 2022) that you can use to calculate this deduction. Instead of tracking and deducting individual expenses like gas, maintenance, and depreciation, you simply multiply your business miles by the standard rate.
- Medical Mileage Deduction: When you drive for medical reasons, such as going to doctor’s appointments, medical treatments, or the pharmacy, you can also deduct a portion of your mileage at a lower rate set by the IRS (e.g., 18 cents per mile in 2022).
- Charitable Mileage Deduction: If you use your personal vehicle for charitable activities, such as volunteering for a qualified nonprofit organization, you can deduct the mileage driven at the charitable standard rate, which is also set by the IRS (e.g., 14 cents per mile in 2022).
- Moving Mileage Deduction (Discontinued): Until 2017, taxpayers who moved for work-related purposes could deduct their moving expenses, including mileage. However, this deduction was eliminated for most taxpayers under the Tax Cuts and Jobs Act of 2017, with some exceptions for members of the military.
Requirements for Claiming the Deduction:
To claim the mileage tax deduction, you must meet certain IRS requirements:
- Keep detailed records of your mileage, including dates, destinations, and the purpose of each trip.
- Maintain accurate records of all expenses related to your vehicle, including gas, maintenance, insurance, and registration, as these expenses may be deductible in addition to the mileage deduction for business use.
- If you’re claiming the business mileage deduction, you should be able to demonstrate that your travel is for a legitimate business purpose.
How to Calculate the Deduction:
To calculate your mileage deduction, multiply the number of eligible miles driven by the IRS’s standard mileage rate for the respective category (business, medical, or charitable).
Documentation and Record-Keeping:
Accurate record-keeping is crucial when claiming the mileage tax deduction. Keep a detailed log of your mileage, including the date, purpose, starting and ending locations, and total miles for each trip. You should also keep receipts and records of vehicle-related expenses for backup documentation.
IRS Updates:
The IRS typically updates the standard mileage rates annually, so it’s essential to use the most current rates for your tax filings. Consult the IRS website or tax preparation software for the latest rates and guidelines.
Consult with Matthew Jennings, JD, MBA, EA, RFC®, CEP®, CES™, aka Tax King Matt to ensure you’re correctly calculating and claiming the mileage tax deduction. Accurate record-keeping is vital, as the IRS may request documentation to support your deductions during an audit.