IRS Sets Standard Mileage Rates for Use of a Vehicle in 2023 by Steven Rubin, CPA
Posted on March 23, 2023
by
Steven Rubin
With the start of a new year, the IRS announced the inflation adjustments taxpayers may use to determine the deductible costs of operating a motor vehicle for business, charitable and medical purposes. Alternatively, taxpayers may calculate these deductible expenses based on the actual costs they incur to use their vehicles.
Effective Jan. 1, 2023, the standard mileage rates for the use of a car, van, pick-up or panel truck are as follows:
- 65.5 cents per mile driven for business use, up 3 cents from the rate set for the period of July 1, 2022, to Dec. 31, 2022, and a total of 7 cents from the applicable rate for January 1 to June 30, 2022
- 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, unchanged from the midyear rate set for the second half of 2022; and
- 14 cents per mile driven in service of charitable organizations, unchanged from the beginning of 2022.
Taxpayers may use these standard mileage rates for up to five vehicles they do not claim on their federal tax returns as Section 179 expenses or that they depreciate under the Modified Accelerated Cost Recovery System (MACRS). They also must use these standard rates in the first year they place vehicles into service for business use. In later years, they may elect to use actual expenses unless the vehicle is under a lease.
Before applying the standard mileage rates, taxpayers must recognize that they generally may not claim miscellaneous itemized deductions for unreimbursed employee travel expenses unless they are self-employed, eligible educators, performing artists, certain government officials and members of the Armed Forces. Under current law, taxpayers also are prohibited from claiming a deduction for moving expenses unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station.
Businesses may rely on these optional standard mileage rates to reimburse workers for the ordinary and necessary costs employees incur when using their personal vehicles for business purposes. Alternatively, employers may require workers to track the actual business use of their vehicles and submit documentation to substantiate the costs for which they request reimbursement. Companies generally may deduct employee reimbursements as business expenses, while employees may exclude those reimbursed amounts from their taxable income.
About the Author: Steven Rubin, CPA, is a senior manager of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he provides federal, state and local tax compliance and consulting services to corporations, closely held businesses and high-net-worth families. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or info@bpbpcpa.com.
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