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Driving to meet clients, suppliers, and distributors is part of the job for many business owners. In fact, you may find that you spend more time in your car than you would really like to every week. All those miles can add up too. Which is why you should always keep track of your mileage, so you can deduct them on your business taxes. Every year, the IRS announces the standard mileage deduction rates for the upcoming tax season. Sometimes, the number stays the same. However, in 2023, the new standard mileage deduction rates will increase.
New Standard Mileage Deduction Rates for 2023
Before we share the new standard mileage deduction rates for 2023, let’s go back to January of 2022. At that time, the mileage rate was 58.5 cents per mile.
Rising gas prices caused the IRS to quickly change the mileage rate in the middle of 2022. The new standard mileage rate increased 3 cents per mile. That made each mile worth 62.5 cents.
Gas prices may have dropped slightly since that time. However, the IRS has decided the new standard mileage deduction rate for 2023 will be 65.5 cents per mile. That is a whole 7 cents higher than last January’s mileage rate!
Ready to see how the standard mileage rate has changed over the years??
2018: 54.5 cents per mile
2019: 58 cents per mile
2020: 57.5 cents per mile
2021: 56 cents per mile
2022: 58.5 cents per mile for the first 6 months, then increased to 62.5 cents for the remainder of the year
2023: 65.5 cents per mile
Unchanged Standard Mileage Deduction Rates for 2023
There are a couple standard mileage deductions rates that will remain unchanged for 2023. Moving mileage for active-duty military members will stay at 22 cents per mile. Miles driven for medical purposes will also stay at 22 cents per mile.
The other mileage rate that will remain unchanged is miles you drive for charitable work. That mileage stays the same at 14 cents per mile.
How to Determine Your Vehicle Cost for Your Business
You can choose to utilize the standard mileage rate for your vehicle when you calculate your business taxes. Or you can utilize the actual expense method. Obviously, the former is much easier. As long as you keep an excellent log of the miles you have driven for your business.
Calculating the actual expense method takes more work. There is a lot more record-keeping involved. However, that method can be helpful if you use one specific vehicle for your business and don’t drive it for your personal trips. This method will allow you to deduct gasoline and even car repairs.
It is important to note that you cannot claim the standard mileage rate after deducting actual expenses. These two deductions cannot be combined.
What to Include in Your Mileage Log
If your business is ever audited, you will need proof you actually drove the number of miles you did. The best thing to do is to make sure you have these following items in your mileage log:
- Your mileage
- Date of each business trip
- Locations of each business trip
- Purpose of each business trip
It is also helpful to determine how many miles you drove your vehicle for commuting and personal trips in the same year. This will show the IRS you are not claiming every single mile you drove.
You can create a spreadsheet to use for your mileage log or you can utilize a mileage tracking app. Whichever option you choose, make sure you can access those records for 7 years. Although, businesses are encouraged to keep their tax records permanently, in case they are audited.
Be prepared for your 2023 business taxes by keeping track of your mileage and being aware of the new standard mileage deduction rates. Tracking your business miles is an easy way to score a deduction on your business taxes. If you need any assistance setting up or growing your business this next year, contact us today. Our team of experts is ready to help you create a successful business.
