How To Claim Mileage on Taxes in Five Steps
Claiming a mileage deduction is an important part of reducing taxes for anyone who owns a business or is self-employed and uses their vehicle for business. So, you may be wondering how does mileage deduction work?
In this guide, we will explain how to claim mileage on taxes and why this is beneficial.
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Who can claim mileage deductions?
The mileage deduction can be taken by individuals who are self-employed, own a business, and for Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. A mileage deduction can be taken for almost any business-related driving.
People driving for medical or charitable purposes can also claim a mileage deduction. But the rate is lower, and there are requirements and limits that apply.
Methods for claiming mileage on taxes
There are two methods you can use to claim your mileage deduction.
Use the standard mileage rate. To use this method, you track your mileage for business purposes and then multiply the miles by the standard mileage rate given by the IRS. Here are the standard mileage rates for the first and second halves of 2022 (see the new, 2023 IRS mileage rate).
- For the first six months, it was 58.5 cents for business purposes, 18 cents for medical purposes and 14 cents for charitable purposes.
- For the second half of 2022, it is 62.5 cents for business purposes, 22 cents for medical purposes and 14 cents for charitable purposes.
- Use your actual expenses. The IRS permits individuals to track their actual expenses when claiming their mileage deduction. If you use this method, you will track all your vehicular expenses instead of your mileage.
How to deduct mileage on taxes
Here are the five steps you'll need to take to claim mileage on your taxes.
1. Choose your method of calculation
You will need to choose either the actual expense method or the standard mileage deduction method. However, you must use the standard mileage rate for the first year the car is in service.
If you have kept sufficient documentation, choose to calculate the deduction using both methods and select whichever gives you the highest deduction.
2. Gather your documents
The necessary documents depend on which method you use. If you use the standard mileage deduction method, you will need your mileage logbook. If you are using your actual expenses, you will need receipts showing your expenses. However, you will probably want to track your mileage, so you can see which method will give the higher deduction.
3. Calculate your eligible deduction
Now it's time to see exactly how to claim mileage on taxes. If you are using the standard mileage deduction, take the total business miles you recorded for the year and multiply this by the standard mileage rate as listed earlier.
If you use actual expenses, you add up all of your vehicle-related travel expenses for the year and multiply this figure by the percentage the car is used for business or charitable purposes.
4. Filling out the form
If you are a business owner or self-employed, you will record your vehicle expenses on Schedule C, Part ll, Line 9. This will be the standard mileage deduction or actual expenses you calculated.
You will also need to complete Part lV, in which you will give some information on your vehicle, such as:
- The year you placed your vehicle into use for business purposes
- The total number of miles you drove your vehicle and the number of miles it was used for:
- Was your vehicle available for use during off-duty hours?
- Do you or your spouse have another vehicle available for personal use?
- Do you have any evidence to support your deduction? ( This would be a mileage logbook or anything else you use to keep track of your mileage.)
You can fill out Schedule C in paper form or online by using an IRS e-file or a professional tax service.
If you are deducting mileage for medical purposes, the mileage deduction will be deducted as part of your total unreimbursed medical expenses on Schedule A, line 1.
For charitable mileage deductions, you will use Schedule A, Line 12. You can use the standard mileage rate for charitable purposes or your actual expenses. There are limits on the amount you can deduct, which are explained in the Schedule A Instructions.
4. Retain your records
Be sure to keep your records. You are required to maintain them for three years, and you will want to keep them for proof if needed.
Why tracking & claiming mileage Is beneficial
Anyone who regularly uses their vehicle as part of their business knows the costs can add up fast. By tracking your mileage using a mileage tracker, you can save money by claiming the mileage on your taxes without the hassle of keeping manual mileage logs. Mileage tracking apps like Driversnote will also keep your logs safe, should you need to provide them for an audit at a later stage.
IRS Mileage Guide
- Calculate Your Reimbursement
- Is Reimbursement Taxed?
- How The IRS Mileage Rate Is Set
- Current Mileage Rates
- How To Claim Your Mileage On Taxes In 5 steps
- Mileage Log Requirements
- For Self-Employed
- IRS Medical And Charitable Mileage
- California Mileage Reimbursement
- For Employees
- For Employers
- IRS Mileage Rate 2022
- IRS Mileage Rate 2021
- Mileage Rates 2020