Tax season is upon us, and with it comes the task of figuring out all the deductions you can take to lower your tax bill. One commonly overlooked deduction is the mileage rate, which allows you to deduct the cost of driving your car for business, medical, or moving purposes. However, it’s important to note that there’s not just one mileage rate – the Internal Revenue Service (IRS) sets multiple rates for different purposes, and understanding which one to use can be confusing.
The IRS sets a standard mileage rate each year based on the costs of operating a car, including the cost of gasoline and other associated expenses. For business purposes, the standard mileage rate for 2022 is 56 cents per mile, while the rate for medical and moving purposes is 16 cents per mile. The IRS also made an unusual move in 2022 and increased some of the rates mid-year due to the volatility of gas prices.
While these rates are useful benchmarks, it’s important to note that there are limitations to who can claim a mileage deduction. The Tax Cuts and Jobs Act of 2017 disallowed the deduction for regular moving expenses and unreimbursed employee travel expenses. Only members of the armed forces on active duty and moving under orders for a permanent change of station can claim a deduction for moving expenses.
So, what does this mean for you? If you’re an employee who wasn’t reimbursed for work-related driving, you won’t be able to claim a deduction for those miles. But if you’re self-employed, you can claim the business mileage rate on your tax return. Just be sure to keep track of your miles driven and the purpose for each trip, as the IRS requires documentation to support your deductions.
Maximizing your deductions during tax season requires a close examination of all your expenses, including mileage. The multiple mileage rates set by the IRS can be confusing, but understanding which one to use and who can claim a deduction can help you save money on your taxes. If you have any questions, consult with a tax professional and keep detailed records.