Get the Most from Your 2023 Mileage Tax Deduction

Do you drive for your job or business? Then you might be eligible for a mileage deduction. Here is an easy-to-understand guide to the IRS standard mileage deduction. Happy filing!

In 2023, you can deduct 65.5 cents per mile driven for business uses.

If you drive a lot, either for your business or for an employer who doesn’t reimburse your expenses, keeping careful track of your miles will give you the biggest tax deduction.

1. What Kind of Driving is Deductible?

If you drive for business in some way and your employer does not reimburse you for gas, those miles are eligible for the deduction. Common jobs which accrue deductible miles include realtors, sales, and contractors.

In addition, miles logged for charitable organizations and medical or moving expenses can also be deducted.

Here’s the full list:

• Business Use: $0.655/mile
• Medical, Moving Purposes (active duty only): $0.22/mile
• Charitable Organizations: $0.14/mile

2. Is it Worth My Time to Log the Miles and File the Deduction?

To be able to take advantage of this deduction, your unreimbursed expenses must equal more than 2% of your salary.

If you have to drive three miles down the road several times a week to go from the main office to the salesroom, it’s not necessary to start logging your miles.

If, however, you spend a great deal of each day in the car, you could be missing out on some major tax savings if you do not deduct your miles.

3. What is the Rate for the Mileage Deduction?

For miles driven this year, the business mileage rate is 65.5¢ per mile. This is the most commonly used measure since a large number of Americans are either self-employed or work for a small business where their miles can be deducted.

The rate for mileage accrued for charitable organizations is 14¢ per mile. The rate for medical or moving expenses (for active duty members of the Armed Forces who qualify only) is 22¢ per mile.

Here’s a little more info on this from the IRS.

4. What Kind of Driving is not Eligible for the Deduction?

1. You are not entitled to the deduction for miles driven during your commute
2. You cannot be using more than five cars at once to qualify, and your car cannot be for hire (in other words, you cannot deduct your mileage if you are running a taxi company)
3. Finally, if this is the first year you have accrued unreimbursed miles for business, you must take the standard mileage deduction, rather than the Actual Expenses Deduction

5. What Is the Actual Expenses Deduction?

If you believe the cost of using the car will add up to more than the $0.655 per mile the standard mileage deduction will provide you, it might make sense to deduct your actual expenses.

Vehicle expenses you can deduct are:

• Gas
• Insurance
• Maintenance (including tires)
• Registration Fees
• Car loan interest (but not principal payments!)
• Lease payments
• Garage rent and parking
• Tolls
• Depreciation

Do not forget, however, that parking expenses are still deductible even if you choose the standard deduction.

This option is not for everyone, but if you’re organized and diligent, you might find that this is the better option for you.

Standard Mileage Rate vs. Actual Vehicle Expenses

Here’s a little example for comparison.

Let’s say you drive a total of 12,000 miles in a year, and thanks to Hurdlr or another tracking method, you know 3,000 of those miles were for business.

If you go with the standard mileage deduction rate, your work is super simple:

3,000 x $0.655 = a deduction of $1,965

If you want to utilize actual vehicle expenses to calculate your deduction, you’ll need to diligently track all vehicle-related expenses for the year. For simplicity’s sake, we’ll say it’s $10,000 for the year.

You can only deduct the percentage of vehicle expenses which are actually attributable to your driving for work.

In this example, your business mileage was 25% of your total miles driven, which means you can deduct 25% of the actual vehicle expenses, or $2,500.

• Standard rate: $1,965 deduction
• Actual expenses rate: $2,500 deduction

In the above example, using the actual expenses gives you a more favorable deduction.

However, if you only spent $6,500 on vehicle costs, your deduction would drop to $1,655, which is ~$300 less than your standard deduction

There are a few rules of thumb that you can use in a general way to help you decide.

• If you drive an older, less expensive vehicle, you’re probably better off using the standard rate.
• If you experience very low operating expenses for your car, the standard rate is still probably best.

But a good plan might be to use the standard mileage rate your first year with a vehicle and then reevaluate from year to year by doing the calculations.

If you use the actual expenses method the first year, you’re not allowed to switch back to the standard deduction in the following years.

Here’s more about the rules for deducting mileage expenses from H&R Block.

6. Are There Any Tools Which Can Help Me Log My Miles?

For years, the only way to keep track of miles for this deduction was with pen and paper.

Now, there are several programs out there that can log your miles automatically through your GPS.

Check out Hurdlr.

How do you track your mileage?

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