Standard Mileage Rate Tax Deduction Overview

What Is the Standard Mileage Rate?

The standard mileage rate, also known as the mileage per diem or deductible mileage, is the default cost per mile set by the Internal Revenue Service (IRS) for taxpayers who deduct the expense of using their personal vehicles for business, charitable, or medical purposes.

The rates are usually set annually by the IRS and differ depending on whether the vehicle is used for business, charitable, or medical purposes. In 2022, soaring gasoline prices prompted a mid-year adjustment.

• For the 2022 tax year, there are two standard mileage rates for business use: The rate was set at 58.5 cents per mile from Jan. 1 through June 30, then raised to 62.5 cents for the remainder of the year.
• For the 2023 tax year, the standard mileage rate for business use is 65.5 cents per mile.
  

By the way, the IRS doesn't care if your car is gas-powered or electric. The standard mileage deduction is the same for all vehicles.

Understanding the Standard Mileage Rate

The taxpayer has the option of calculating the amount of the deduction using the standard mileage rate or based on actual expenses. Needless to say, it's a great deal more work for a taxpayer to track and record every mile driven, and categorize its purpose as business or personal.

The standard mileage rates vary by each allowable use. The rates for the three allowable uses are currently as follows:

• For the 2022 tax year, Jan. 1 through June 30: The deduction for business use is 58.5 cents per mile; for medical purposes is 18 cents per mile, and for charitable purposes is 14 cents per mile.
• For the 2022 tax year, July 1 through Dec. 31: The deduction for business use is 62.5 cents per mile; for medical purposes is 22 cents per mile, and for charitable purposes remains at 14 cents per mile.
• For the 2023 tax year: The deduction for business use is 65.5 cents per mile; for medical purposes is 22 cents per mile, and for charitable purposes stays at 14 cents per mile.

The deduction for use of a vehicle as a moving expense is no longer allowed except for active military members. The standard mileage rates are the same as those for medical purposes.

How the Rates Are Set

The IRS bases the mileage rates on cost data and analysis compiled by Motus (formerly Runzheimer). Motus uses data from across the country and measures auto insurance premiums, gas prices, maintenance costs, depreciation, and other costs that go into operating a vehicle.

The standard mileage deduction for operating a vehicle for business purposes is based on both the fixed and variable costs of driving a car, while the standard mileage deduction for operating a vehicle for medical or moving purposes is based only on the variable costs of driving a car.

The standard mileage deduction for using a car for charitable purposes is based on minimums established by federal law and is meant to reimburse taxpayers for the unreimbursed, out-of-pocket costs of volunteer work.

Which Method to Use

While a taxpayer can choose to deduct actual expenses or take the standard mileage deduction, the taxpayer who takes the standard deduction has a much simpler and less error-prone job to do. The odometer checks are necessary in either case to enter the total number of miles used for business. However, no receipts need to be saved if the standard mileage amount is used.

The taxpayer must own or lease the vehicle in order to claim the standard mileage rate on it. A taxpayer can claim the standard mileage rate on up to four vehicles.

Commuting to a regular place of business is not deductible, but driving to client meetings or events may be. A taxpayer can deduct mileage when providing services, like volunteering at an event for a 501(c)3 charitable organization.

Example of Standard Mileage Rate

A taxpayer owns a 2018 Ford Escape and drives it for business purposes. The taxpayer can claim the standard mileage rate for every mile driven for business purposes during the year.

To claim this rate, the taxpayer logs all the miles driven for business purposes in a notebook in the car's glove box. (Naturally, there are apps for this, too.)

At the end of the year, the taxpayer multiplies the number of miles driven for business purposes by the 2022 standard mileage rate of 58.5 cents per mile.

A taxpayer who drove 4,500 miles for business purposes in 2022 could then deduct 4,500 multiplied by 0.585, or a total of $2,632.50 as an allowable business expense.

The Bottom Line

As always, itemizing your expenses is a lot more work than taking the standard deduction. In the case of the standard mileage rate for business use of a vehicle, it may save you money depending on how much you use your car for work, and how important that vehicle is to your income.

If you're a ride-sharing driver, for example, you might find it worthwhile to keep all of your receipts and itemize your real expenses. In that case, get yourself a good expense-tracking app.

Whether you're taking the standard mileage rate or itemizing, make sure to keep an accurate log book and record every trip you take for business in your personal vehicle.