If you do any significant amount of driving for business purposes, you can deduct the miles you’ve driven or the expenses associated with that travel as a business expense on your tax return. Keep reading to find out more about the standard mileage deduction amounts for 2023.
If you do any significant amount of driving for business purposes, you can deduct the miles you’ve driven or the expenses associated with that travel as a business expense on your tax return. But just how much can you deduct, and what do you need to do to claim this deduction? Keep reading to find out more about the standard mileage deduction amounts for 2023, as well as more information about this tax deduction.
What Is the Standard Mileage Deduction?
The IRS reassesses the standard deduction amount for business mileage driven each year. This year, due in large part to the increase in gas prices, the standard deduction rate has increased 3 more sense from the midyear increase provided in mid-2022. This means that you can deduct 65.5 cents for each mile driven for business use. Whether or not this amount will change at midyear again remains to be seen.
So, let’s say that you drove 15,000 miles for business purposes this year. This could include trips to visit clients, attend conventions, meet with potential suppliers, and so on. (It does not, however, include your commute to the office each day.) To determine your deduction for mileage driven, you would simply multiply 15,000 by the standard deduction amount of 65.5 cents. This would make your standard business mileage deduction $9,825 for the year.
What Is My Other Deduction Option?
The other option for deducting your business mileage is to track all of your vehicle maintenance and fuel expenses, as well as the number of miles you drove for business purposes. The percentage of your total miles driven that were for business purposes would be used to calculate your total deduction. For example, your total mileage on your vehicle for 2022 was 30,000 miles. According to the records you kept, you drove 15,000 of those miles for business purposes. This means half of your mileage driven was for your business.
Your total fuel and vehicle maintenance costs for last year were $16,000. Because half of your driving was done for business purposes, you can deduct half that amount, or $8,000, on your 2022 tax return. As you can see, this is lower than the standard mileage deduction for the same number of miles, but this will not always be the case. Whether it’s better to take the standard mileage deduction or to calculate actual costs for your deduction will depend on your individual financial circumstances. The only way to know for certain which option you should take is track your expenses throughout the year and perform both calculations to see which offers the larger deduction.
How Do I Claim My Business Mileage Deduction?
As we stated above, you’ll need to carefully track the total miles you’ve driven for business purposes in order to claim your deduction. This doesn’t just mean a total number of miles driven. You should keep a spreadsheet that details the date, purpose of the trip, odometer reading before the trip, odometer reading after the trip, and the total miles driven that day. Then, you can total up all of the miles driven for business purposes at the bottom of the spreadsheet.
If you want to also calculate your deduction for actual vehicle maintenance costs, you will need to do all of the above, as well as keeping track of all of your fuel and vehicle maintenance expenses. It’s best to keep copies of all receipts for these purposes as well. Since most people obviously don’t want to keep a large folder full of gas station receipts, you can simply snap a photo of the receipt, making sure the date and the total are visible on it, then create a digital file folder for storing all documents related to your business mileage. You will also need to make sure that you check your odometer reading on the first of the year, as well as on New Year’s Eve so that you can record the total number of miles driven that year and calculate what percentage was for business purposes.
Get Help Claiming Your Business Mileage Deduction
Obviously, keeping all of these records and performing several different calculations to determine which deduction you should take can be time-consuming. Additionally, if not done correctly, you have a higher chance of being audited by the IRS. If you require assistance claiming your business mileage deduction or with filing your business tax return this year, contact Peacock & French CPAs today to schedule a consultation with one of our experienced business tax preparers.