Claiming a Mileage Deduction
The IRS recently announced the change in the standard mileage rates which started Friday, July 1, 2022.
The new rates are as follows: business miles are 62.5 cents, up from 58.5 cents. Medical and military moving miles are 22 cents, up from 18 cents. And miles for charitable organizations stay at 14 cents.
Who can claim a mileage deduction?
A charitable mileage deduction may be claimed on your Schedule A as a charitable donation, if you itemize. The miles must be driven for the performance of service to a charitable organization recognized as a charity by the IRS.
A medical mileage deduction may be claimed when you use your own auto for medical reasons, such as attending appointments and driving to the hospital. This dollar equivalent will be added to the other deductible medical expenses on your Schedule A, if you itemize. (Even though you itemize, you still may not be able to claim a medical deduction because only the portion of your medical expenses that exceeds 7.5% of your Adjusted Gross Income will count towards your total itemized deduction.) If you believe you will benefit from this deduction, keep track of the miles so they can be added to your tax return.
A business mileage deduction can be taken on the tax return in a few different cases. Those who file Schedules C, E, or F, are the most common.
Business automobile deductions
There are two ways to claim expenses for operating your vehicle for business purposes: actual expenses or standard mileage rate. Whichever method you choose, you will still need to keep track of business v. personal miles in a “contemporaneous log.” That means that miles need to be logged at the time you drive them. It is not acceptable to make a generalized guess for business miles driven. You can use a calendar, paper form, spreadsheet, or an app on your phone. (There are many apps which track driving and ask you to categorize each trip as business or personal. If this works for you, check online for options.)
Actual expenses are just that, actual expenses. Fuel, repairs, insurance, etc. Many people do not drive their vehicles 100% for business so all the expenses will need to be apportioned according to the percentage of business miles v. total miles driven. Loan interest, parking, tolls, and taxes are also deductible. Please note that the vehicle loan payment is not directly deductible. A vehicle is an asset and will need to be depreciated according to the IRS regulations for the type and use of your vehicle.
The standard mileage rate was calculated as an average cost of operating a vehicle per mile. When you claim the 62.5 cents per mile, those costs included in that figure are fuel, minor repairs, upkeep, insurance. There is also a portion of that amount which covers depreciation of your vehicle. That depreciation component also fluctuates each year. When you sell or trade a vehicle on which you have claimed a mileage deduction, you may be subject to a recapture of that deduction as ordinary income. Let your tax professional know when you buy, sell, or change vehicles.
The standard mileage rate does not include loan interest, parking fees, tolls, nor taxes. These may be deductible on top of the standard mileage. (And, as always, fines and penalties are not deductible. That includes parking tickets and speeding tickets.)
Keeping mileage logs
Here is the information that should be included in your mileage log:
- purpose of the trip,
- number of miles driven.
Since the mileage rates changed on July 1, there will be two input figures for 2022–miles driven before July 1, and miles driven after June 30.
If you have any questions, please contact First City Income Tax at 912-335-5404.