Good News: IRS Increases Mileage Rates for 2023

The IRS mileage rate is an important number for anyone who uses their vehicle for business purposes. Here’s some good news if you’re claiming an IRS mileage deduction: On January 1, 2023, the IRS increased its mileage rate for vehicle operating deductible costs by three cents per mile.

How Mileage Deduction Works

Employees and independent and self-employed taxpayers can deduct the cost of using their personal vehicles for business purposes on their tax returns. Employers who grant their workers mileage reimbursement may also claim this expense as a tax-deductible business cost.

Mileage reimbursement extends to all costs of operating a personal vehicle for business. This deduction works with standard per-mile rates, which is the simplest way to claim IRS mileage. You may also keep track of your actual expenses and claim these as deductible, but this method requires significantly more time and effort.

Mileage deduction applies to cars, pickups, panel trucks, and vans, whether gasoline- or diesel-powered, EVs, or hybrid vehicles.

What Is the Current IRS Mileage Rate?

The 2023 deductible IRS mileage rate is:

  • 65.5 cents/mile for business usage
  • 22 cents/mile for moving or medical purposes (applicable to eligible active-duty members of the U.S. military forces)
  • 14 cents/mile for charitable purpose usage

The current business mileage rate is a significant three-cent increase from the midyear increase the IRS implemented in June 2022. The previous standard IRS mileage rate was 62.5 cents/mile, which was itself an increase from the 58.5 cents/mile the IRS set at the beginning of 2022.

According to the current calculations, for every 100 miles you drive for business purposes, you’ll be able to claim a return of $65.50.

What Counts as Business Mileage?

According to IRS rules, business mileage is any distance you drive for work. Qualifying work trips include:

  • Driving between different worksites or offices
  • Using your vehicle for business errands or to run deliveries
  • Driving to at-home customer visits or meetings with clients

Does Mileage Reimbursement Count as Taxable Income for Employees?

Mileage reimbursement doesn’t count as an employee benefit and, thus, isn’t taxable. However, if the reimbursement surpasses the standard IRS mileage rate, excess amounts begin to count as taxable income.

If your employer chooses a reimbursement method other than the standard mileage rate, like a mileage allowance or a fixed and variable rate, these payments must not exceed the standard rate, or they’ll become taxable.

Note that employees can only claim business mileage as a tax deduction if their employers reimburse them. You’ll also need to provide clear business mileage records.

How To Keep IRS-compliant Mileage Records

To make sure you claim an accurate number on your mileage deduction, log and save this information:

  • Total mileage for every business trip
  • The trip’s time, date, and purpose
  • Your location or destination

Save these records as soon as possible after the trip to make it easier to calculate your total annual business mileage. Pay attention to your records to separate business trips from personal driving using the same vehicle. You can use a mileage tracker for easier recordkeeping.

Levy & Associates: A Full-service Consultancy for All Your Tax Needs

Understanding the IRS mileage rate is just one part of your tax requirements. Avoid tax pitfalls and save time, money, and energy by working with Levy & Associates, a full-service accounting, tax resolution, and audit defense firm with over 20 years of practice. Our talented team includes tax attorneys, former IRS officers, and qualified CPAs.

Call 800-TAX-LEVY or contact us online to learn more about our full range of tax services.

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.