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What You Need to Know About the Updated IRS Standard Mileage Rate in 2023

Dealing with vehicle-related expenses like paying for gas and diesel can be a daily chore if your business requires you to have a vehicle to deliver products or get you to work meetings. Unfortunately, this means your monthly fuel bill can quickly become one of the most significant expenses in your overall budget. Thankfully, the IRS lets you deduct mileage costs for every business mile your vehicle has run.

What's the IRS mileage rate?

This is a fixed amount set by the IRS for self-employed individuals, freelance delivery drivers for Doordash or Uber and small business owners to offset fuel expenses when they use vehicles for business purposes.

The standard mileage rate is a more simplified and straightforward method than itemizing the amount you spend on fuel and other car expenses because in the latter, you need to keep track of all the fuel receipts, as well as keep a log of your business miles traveled. When you choose the standard deduction method, the IRS only requires you to keep a mileage log.

The standard mileage rate is significant to self-employed individuals, freelancer delivery drivers and small business owners because it helps them significantly lower their tax liability. In the 2023 tax season, the 2022 mileage rate can significantly bump up your tax refund when you file your 2022 tax return on April 17, 2023.

What's the IRS standard mileage rate for 2023?

The current global situation has pushed inflation rates to a historic high in the US, meaning the average American spends more on basic necessities than ever before. Fuel, which falls on the IRS' list of necessities, is affected too, and the IRS is providing some relief to small business owners by raising the standard mileage rate higher than it was in 2022.

The 2023 standard mileage rates are as follows:

  • 65.5 cents/mile for business use of vehicle – this rate is meant for the business use of vehicle and is for self-employed individual, freelance delivery driver and small business owner.l
  • 22 cents/mile for medical trips and moving purposes for active-duty armed forces
  • 14 cents/mile for charitable use of vehicle – when your vehicle is being used for delivering relief work from a forest fire or delivering material to a disaster zone.
  • 28 cents/mile is the depreciation portion for the vehicle used for business purposes.

2022 vs. 2023 Standard Mileage Rate

Purpose

Cents per mile in 2022

Cents per mile in 2023

Business 

62.5 

65.5 

Medical/moving

18-22 

22 

Charitable

14

14 

Vehicle depreciation

26 

28 

How does the standard mileage rate work?

A flat rate simplifies your business expense claim, and it reflects the average cost of operating a vehicle with the resulting depreciation. If you choose the standard mileage method, you can't deduct the actual expense of operating the vehicle you use for your business.

To calculate your deduction, multiply your business miles by 65.5 cents to arrive at your final deduction amount. If you traveled 10,000 miles in a tax year, you could deduct $6,550 from your taxable income. But let's say your semi-truck had a breakdown during the same year, and the bill for repair was $7,000. If you choose to itemize this large expense, the actual expenses method will likely bring you a more significant deduction.

Apart from this deduction from a repair job, you can also factor in other deductions like fuel cost, vehicle depreciation and other maintenance during the year.

The infographic entitled Top 3 Actual; Expenses for Vehicle lists three deductions, namely parking slips, toll fees and licenses
Top 3 acual expenses for vehicle

Can a W-2 employee claim the standard mileage deduction?

Let's say you are a delivery driver working as a full-time W-2 employee for a large company like Amazon. You can't deduct your miles because the company owns the vehicle, and you are on the payroll.


FYI, the IRS doesn't consider miles commuting to and from work as a business deduction for W-2 employees or for 1099 employees. But if you have further questions like this, you can refer to FlyFin, which has a massive list of tax resources addressing such questions.

FlyFin CPA Team

FlyFin CPA Team

With a combined 150 years of experience, FlyFin's CPA tax team includes tax CPAs, IRS Enrolled Agents and other tax professionals, offering users the most comprehensive tax advice and preparation.

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