Claiming a deduction for mileage can be a good way to reduce how much you owe Uncle Sam, but not everyone is eligible to write off their travel as a tax deduction.
In the past, taxpayers had more options to deduct mileage and could claim unreimbursed travel while on the job.
“That’s not deductible anymore,” says Michelle Brown, managing director in the Kansas City office of accounting firm CBIZ.
The Tax Cuts and Jobs Act of 2017 eliminated itemized deductions for unreimbursed mileage and also significantly narrowed the mileage tax deduction for moving expenses. That can now only be claimed by active-duty military members who are relocating because of new orders.
Still, a mileage deduction exists for the following situations:
— Business mileage for the self-employed.
— Mileage related to medical appointments.
— Mileage incurred while volunteering for a nonprofit.
You need to know the rules for claiming mileage on your taxes and, more importantly, you need to keep careful records. Here’s a breakdown of everything you need to know about how to claim mileage on taxes.
[READ: Tax Prep Checklist: Collect These Forms Before Filing Your Taxes.]
Current Tax Deductible Mileage Rates
How much you can deduct for mileage depends on the type of driving you did. Business mileage is most common, but you can also deduct mileage accrued for charitable purposes or for receiving medical care.
“Those are itemized deductions,” Nicole Davis, a CPA and member of the FreshBooks Accounting Partner Program, says of charitable and medical mileage. “That mileage rate is a lot lower than the business mileage rate.”
For the 2022 tax year, the IRS approved the following standard mileage rates:
— Business: 58.5 cents per mile from Jan. 1, 2022-June 30, 2022 and 62.5 cents per mile from July 1, 2022 — Dec. 31, 2022.
— Charity: 14 cents per mile.
— Medical/Moving: 18 cents per mile from Jan. 1, 2022-June 30, 2022 and 22 cents per mile from July 1, 2022 — Dec. 31, 2022.
Mileage rates for business, medical and moving were all increased mid-year to account for rising inflation. However, the standard mileage rate for charity is set by statute so the IRS cannot adjust it.
Self-Employed Workers: What Mileage Is Deductible
When it comes to mileage tax deductions, the self-employed mileage deduction is the largest one available. It can be valuable to anyone with their own business, but especially for those working in the gig economy as delivery drivers, according to Duke Alexander Moore, an enrolled agent and the CEO and founder of Duke Tax, which specializes in tax services for content creators and entrepreneurs.
Deductible business miles could also be racked up from meetings with clients, travel to secondary work sites or errands to pick up supplies. If a person drives for both business and personal purposes, only miles driven for business can be deducted. Business miles are considered only those driven from a person’s principal place of business.
“We never want to confuse a commute as business travel,” Moore says.
Driving from home to a principal place of business is considered a commute, even for those who are self-employed or small business owners. Only those who have a home office as their principal place of business can deduct mileage when driving to and from home for business-related purposes.
How to Claim Mileage on Taxes
Self-employed workers can claim their mileage deduction on their Schedule C tax form, rather than a Schedule A form for itemized deductions. Mileage for self-employed workers isn’t subject to any threshold requirements. In other words, all miles are deductible regardless of how much a person drives for work.
Is mileage considered an office expense? No, it doesn’t get lumped in with office expenses on a Schedule C. Instead, mileage can be claimed on line 9 for car and truck expenses.
Alternatively, people can claim their actual vehicle expenses for maintenance, repairs and fuel. Workers who use a vehicle for personal travel as well can only deduct a prorated percentage of expenses based on business use. Taxpayers may want to calculate which option will result in the higher deduction, but for most, deducting mileage is easier and will result in greater tax savings.
“The standard mileage deduction is the gift that keeps giving,” Davis says.
Regardless of which method you use — standard mileage rates or actual expenses — plan to stick with it for the duration of the time you own a vehicle. Switching from mileage to actual costs could be difficult since calculations for depreciation may need to be factored in.
The IRS states that taxpayers who want to use standard mileage for their deduction must do so in the first year the vehicle is available for business use. Meanwhile, those who operate a fleet of vehicles — five or more — can only deduct actual expenses.
[Read: How to File a Tax Extension.]
Itemize Your Deductions to Claim Medical and Charitable Mileage
Self-employed people aren’t the only ones who can take advantage of mileage tax deductions, but everyone else will need to file a Schedule A form and itemize their deductions if they want to get in on the tax savings. Those who itemize may be able to deduct mileage for medical care and charity work.
But be aware that these deductions are not nearly as lucrative as those for self-employed workers. That’s because the reimbursement rates for medical and charitable mileage are considerably lower than what’s offered for business travel. What’s more, there are thresholds and other limits on these deductions.
“Typically, you won’t see most people taking advantage of these,” according to Moore.
Mileage accrued when driving to and from doctor visits, the pharmacy and the hospital can all count toward a medical deduction. But there’s a catch: Only medical expenses — both mileage and other bills combined — in excess of 7.5% of your adjusted gross income can be deducted.
While it can be difficult to exceed the income threshold, if you had significant medical bills last year, it can be worthwhile to add up your annual mileage for doctor visits to boost your deduction amount.
If you drive to volunteer at your favorite nonprofit, that mileage is deductible as part of your charitable donations. The IRS allows volunteers to claim 14 cents per mile, but you have to be volunteering yourself. You can’t, for example, be driving a child to a volunteer activity. There is no threshold requirement for claiming these miles.
“In order to take advantage (of these deductions), you need to be itemizing,” Brown notes.
With the standard deduction for married couples filing jointly set at $25,900 in 2022, Brown says few people itemize nowadays and will be able to claim charity and medical mileage deductions.
The IRS Will Want to See Your Records
While deducting mileage can save tax dollars, think twice before claiming travel time you can’t document. If you’re audited, the IRS will want to see a log that includes dates, destinations and the reasons for travel. These travel logs should record exact mileage amounts.
“It’s something called substantiation,” Moore says. What’s more, the log is supposed to be updated throughout the year as a person drives.
“It could be handwritten; it could be an Excel spreadsheet; it could be an app,” Brown says.
MileIQ, TripLog and Everlance are a few of the apps available that automatically detect travel and log every trip. Users can then categorize their drives by purpose and run reports to document deductions.
There’s nothing stopping those who didn’t track their travel in 2022 from claiming a mileage tax deduction when filing their return this spring.
“Go back to your calendar and create that log,” Davis suggests.
During an audit, taxpayers will need to provide evidence of when they traveled and why. You may be able to piece that together based on bank records of purchases, calendar events and even your phone’s GPS tools.
Still, there is no guarantee the IRS will accept documentation compiled after the fact. It’s better to keep a log right from the start rather than risk a deduction being disallowed during an audit.
Claiming mileage on taxes can add up to a hefty deduction for many people, but the IRS has specific rules regarding when and how it can be claimed. If you are uncertain about the eligibility requirements for mileage to be tax-deductible, consult with a tax professional who can evaluate your situation.
[READ: What Really Happens During an IRS Tax Audit]
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Everything You Need to Know About Claiming a Mileage Tax Deduction originally appeared on usnews.com
Update 03/21/23: This story was published at an earlier date and has been updated with new information.