How To Calculate Mileage For Taxes And Reimbursement
Before we dive into the fairly straightforward calculation that will show you how to calculate mileage for taxes or reimbursement, be aware that you need to qualify to use the IRS standard mileage rate. See the current standard mileage rates.
Note that if you're an employee, your employer might use a different rate than the one set by the IRS. They may also use a different reimbursement method for your business mileage.
If you're self-employed, you should use the corresponding year’s mileage rates to calculate mileage for your tax deduction.
How to calculate mileage reimbursement
We'll look at the two most common situations of calculating mileage reimbursement:
A: You drive your personal vehicle for business, and your company uses the IRS's standard mileage rate to figure out how much you should be reimbursed.
You keep records throughout January 2023, and they show that you've driven 175 miles for business. The 2023 standard mileage rate is 65.5 cents per mile. To find your reimbursement, you multiply the number of miles by the rate:
[miles] * [rate], or 175 miles * $0.655 = $114.63
B: You drive a company vehicle for business, and you pay the costs of operating it (gas, oil, maintenance, etc.).
In this situation, you can't use the standard mileage rate. This is because it's meant to cover both the cost of owning and operating a vehicle, but in this case, you only operate it. Your company has instead set a rate of (for example) 21 cents per mile.
To determine your reimbursement, you run the same operation again:
[miles] * [rate], or 175 miles * $0.21 = $36.75.
So here we can see that owning the car you drive for business results in higher reimbursement – but you also have higher costs, especially when you include the car's depreciation.
How to calculate mileage for taxes
As self-employed, you can calculate and claim mileage on your annual tax return. You should use the corresponding year’s mileage rate set by the IRS - e.g. if you are claiming business mileage you’ve driven in 2022, you should be using the IRS 2022 rates.
Example: You have driven 1200 business miles in 2022 with your personal vehicle. The IRS mileage rate in 2022 was 62.5 cents per mile (from July 1, 2022) for owning and operating your vehicle for business purposes.
[miles] * [rate], or 1200 miles * $0.625 = $750 you can claim as deduction on your tax return.
How to calculate business use
If you drive your vehicle for both business and personal purposes, you need to figure out the percentage of business use in order to calculate how much you can claim in mileage reimbursement or deductions. Let's go through a quick scenario:
You've driven 200 personal miles in a given period. During the same period, you've also logged business trips that totaled 100 business miles.
To figure out your business use, divide your business miles by the total number of miles driven. In our example, you've used your car for business 33% of the time: 100/300 = 0.33.
More information on calculating mileage for your situation
For more information on calculating mileage for taxes or reimbursement, we suggest you continue reading our guides as they provide the information necessary for each situation that you will need to take into account. You can also calculate your mileage for taxes or reimbursement by using our mileage reimbursement calculator.
How to automate your mileage logbook
IRS Mileage Guide
- IRS Medical And Charitable Mileage
- California Mileage Reimbursement
- For Employees
- Current Mileage Rates
- For Employers
- IRS Mileage Rate 2022
- Is Reimbursement Taxed?
- How To Claim Your Mileage On Taxes In 5 steps
- Mileage Log Requirements
- How The IRS Mileage Rate Is Set
- Calculate Your Reimbursement
- For Self-Employed
- IRS Mileage Rate 2021
- Mileage Rates 2020