Hannah Nelson
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Hannah Nelson
Updates to the IRS Mileage Deduction

Updates to the IRS Mileage Deduction

Gas prices rising over the past year have caused many people to limit the use of their vehicles in an attempt to keep more money in their pockets and less in their gas tanks. But for the people who find it necessary to use their vehicle regularly, a break may be coming their way. The IRS allows for a mileage deduction to be taken to receive a tax break for related wear and tear on their vehicle. This deduction can be taken for three different areas of use: for (self-employed) business use, personal or immediate family medical use, and charity/volunteer work.

Business

For individuals who are self-employed, whether filing Schedule C, Schedule F, or Schedule E, a mileage deduction can be applied through the appropriate schedule. This deduction can be taken in one of two ways: mileage incurred, or actual expenses incurred. These different methods are outlined below:

  • Mileage Expense Deduction: This method is simpler for the driver as they don’t have to worry about keeping track of all expenses paid for the vehicle and can simply calculate their deduction with a rate provided by the IRS. This simplicity stems from the fact that all potential expenses are already considered and “built into” the mileage rate. There were different rates for the business mileage deduction for the first and second half of 2022. The first half of the year (January 1, 2022- June 30, 2022) recorded a deduction rate of 58.5 cents per mile. The second half of the year (July 1, 2022 – December 31, 2022) had a set deduction rate of 62.5 cents per mile. To calculate your deduction for 2022, take the business miles for the first half of the year and multiply them by 58.5 cents PLUS the business miles for the second half of the year multiplied by 62.5 cents. The IRS does allow some separate expenses to be taken on top of the standard mileage rate, including-
    • Parking Fees
    • Tolls
    • Car washes
    • Registration Fees
  • Actual Expense Deduction: This method is a bit more tedious and time consuming as you must keep track of everything you spend related to auto use. These items include-
    • Gas
    • Insurance
    • Maintenance
    • Oil Changes
    • Lease Payments
    • Depreciation
    To correctly calculate your deduction, you must take the amount spent on all these items by your business use percentage of the vehicle. (To get the business use percentage, divide business miles by total miles driven in the year). Note that business use will ALMOST NEVER be 100%. If you claim 100% business use, you are claiming that you never make personal stops with the vehicle, such as running to the grocery store on the way home. This is a great way to get audited. With this method, the mileage rate does not need to be considered.

Medical

You can claim the miles driven to and from medical appointments on your Schedule A. Keep in mind this deduction will only become handy if you are one to itemize   deductions on your return. The only miles that cannot be deducted for medical purposes include general health improvement trips, such as your annual checkup,   and trips made for another person in which you are not paying for the appointment. In other words, dropping off a friend at their doctor’s appointment cannot be included in your deductible medical miles unless you paid for their visit. again, the IRS has split the mileage rates for the first and second half of the year.  The first half of the year (January 1, 2022- June 30, 2022) recorded a deduction rate of 18 cents per mile. The second half of the year (July 1, 2022 – December 31, 2022) had a set deduction rate of 22 cents per mile.  To receive this deduction, multiply your medical miles driven by either 18 cents or 22 cents, depending on when those miles were driven.

Charitable Miles

Charitable mileage deductions are those you can deduct when you travel to volunteer for a non-profit organization (recognized under IRS Section 501). This deduction is also only available for those who itemize on their return, similar to the medical mile deduction. This deduction isn’t limited to mileage driven in your personal car but extends to payments made to public transport to get you to the non-profit organization as well. The IRS has set the deduction rate for chartable miles at 14 cents per mile. To calculate your deduction, multiply the total number of charitable miles driven (or the amount paid towards public transportation) by 14 cents.

If there is one concept to take away from this article, let it be the emphasis on diligence and organization. If you plan on taking the deduction in any fashion, remember to stay on top of your expenses/mileage incurred to ensure your deduction is as accurate as possible. Safe driving!


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