Deduct Miles Driven for Work on Your Taxes (2024)

The IRS mileage rate generally increases each year to account for changes in fuel prices, maintenance costs, and other expenses related to driving. This rate is used to calculate deductions for business, medical, or moving expenses when you use your personal vehicle. Here are five quick steps or tips to claim your vehicle mileage deduction:

Step 1: Purchase a vehicle for your business or decide which of your vehicles (personal or a separate vehicle) you wish to use for the year. Begin logging miles driven and any related expenses as you work for your business. The IRS standard mileage rates apply to gasoline, diesel, electric, and hybrid automobiles.

Step 2: Select either the actual expense or standard mileage deduction which best fits your situation. The actual expense method is generally worth more as it takes into account your repairs, upkeep, and other vehicle-related expenses. It is more difficult to claim as you will need to keep track of these expenses during the year.

Step 3: Get your documents together; assemble receipts, a logbook of miles, and bank statements.

Step 4: Start free on eFile.com. The eFile app will not only determine whether or not you can deduct your mileage, but it will also calculate and report the deductible mileage on your return. Additionally, it will also report your vehicle expenses, as well as all your other business expenses, on Schedule C and eFileIT.

Step 5: File and save a copy of your accepted tax return as well as copies of your vehicle records for at least three years, though we at eFile.com recommend holding onto all tax-related paperwork for longer.

Deduct Mileage for Work

What type of miles qualify for a tax deduction? You can deduct business miles or expenses if you are self-employed or an independent contractor and use your vehicle for work. This is reported on Schedule C for you when you file on eFile.com which is automatically generated for you as you work. The IRS has not set a limit or cap on the amount of deductible miles you can claim.

You cannot deduct mileage expenses as a W-2 employee because miscellaneous, unreimbursed employee expenses are no longer tax deductible. However, certain types of employees or workers can still deduct different expenses so you can generally deduct mileage expenses that relate to your work as an employee if you are in any of these occupations:

• Qualified performing artist
• Fee-basis state or local government official
• Armed forces reservist
• An employee with code "L" for box 12 of your W-2.

You can also deduct impairment-related expenses if you require them to work.

Two Deduction Methods for Vehicle Expenses

For a vehicle you own or lease, you can deduct either the actual expenses or the standard rate per mile driven. As a self-employed person or contractor, you can deduct miles driven based on a per-mile rate or you can deduct the full expenses as they relate to your business and vehicle. See the key differences in the table below.

In any year, you can change the method you used based your business and vehicle performances. If your year was simple, meaning you did not have any significant car bills and drove your vehicle for work regularly, then you will likely benefit more from the standard mileage method.

Do you drive for work through a company like Uber or other rideshare platform? Most of these companies contract workers, meaning they are self-employed and can write off business expenses. For most drivers, the mileage deduction is one of the most beneficial tax savings there is. Use eFile.com Premier for self-employed and save up to 66% on your tax preparation fees when compared to popular self-employed tax filing websites.

KEY TAKEAWAYS

• The IRS standard mileage rate is a set amount per mile that taxpayers can use to calculate deductions for business, medical, moving, and charitable driving expenses. It's designed to simplify the process of claiming vehicle-related deductions.
• Using the standard mileage rate helps taxpayers avoid the need to track every individual vehicle expense. Instead, they can multiply the total miles driven by the IRS rate to determine their deduction, saving time and reducing complexity.
• The IRS adjusts the standard mileage rates annually to reflect changes in the cost of operating a vehicle, such as fuel prices, maintenance, and insurance. Make sure you keep up with these adjustments.
• To use the standard mileage rate, you must own or lease the vehicle and use it for qualifying purposes (business, medical, moving, or charitable). You cannot use the standard rate if you've already claimed depreciation deductions for the vehicle using a method other than straight-line depreciation.

Who Can Deduct Miles?

Taxpayers using their car for business purposes, If the car is leased and you use the federal mileage rates, you must use the standard rates for the entire life of the lease. Find out what business miles you can deduct from your income. These mileage rates are optional and you can use the actual vehicle expenses instead of the standard mileage rate as your deduction if you kept detailed records, such as a mileage log.

The question is, how do you know which method is more beneficial for you? When you prepare your return on eFile.com, you can enter the information for both deduction methods and compare the results. eFile will show you which method yields a higher deduction so you can save the most money on your taxes.

The IRS also provides these criteria via Topic 510, Business Use of Car, in order to claim the standard mileage rate:

• During the tax year, you cannot operate five or more cars simultaneously
• You have not and will not be claiming a depreciation deduction for this car other than straight-line
  
  • Straight-line depreciation is an annual depreciation in which the same deprecation deduction is used for the life of the asset. For example, if you depreciate a vehicle over ten years of your business, your deduction may be $500 per year and does not change year-to-year.
  • See instructions for depreciating.
• Section 179 deduction has not and will not be claimed on the car
  • A Section 179 deduction allows you to deduct the full cost of the asset as an expense rather than deprecate and deduct it over several years.
• The special depreciation allowance has not and will not be claimed on the car
  • The special depreciation allowance is part of the 179 deduction which is a limit on the amount you can claim.
• If you lease the car, you must not have claimed the actual expenses after 1997.

A key point here is that you cannot depreciate your business vehicle (other than straight-line) and claim the standard mileage deductions; you can generally only do one or the other. See more details on asset depreciation well as via IRS Publication 463, Travel, Gift, and Car Expenses.

Deductible Car Rates Per Mile

Below are the standard tax-deductible IRS mileage rates for the use of your car, van, electric vehicle, pickup truck, or panel truck for current, past, and future years. The federal mileage rates vary by tax year; generally, they increase each year to adjust for inflation. The rates are categorized into business, medical or moving expenses, and service or charity expenses at a currency rate of cents-per-mile. If you need to prepare and file a previous year tax return, find and download tax forms for previous tax years.

• Business: miles driven for business purposes - Schedule C
• Medical, Move: mileage for driving to hospital, dental, or other medical visits; moving expenses for military - Schedule A
• Service, Charity: miles driven when volunteering for non-profit work- Schedule A.

See details on itemized deductions via Schedule A, the medical deduction, or charity deductions.

Deductible mileage calculation: You can use the information below as a simple mileage calculator. When doing your calculations, multiply the miles you drove (business, charity, etc.) by the cent amount for the year in question. This equation would be "miles driven" x "mileage rate".

Standard Mileage Rate Restrictions: The standard mileage rates may not be used for vehicles used as equipment, for a vehicle which has been claimed for a Section 179 deduction, or for more than four vehicles used simultaneously. You cannot use the standard mileage rates if you claim vehicle depreciation under the Modified Accelerated Cost Recovery System (MACRS). Instead, a portion of the rate is applied, usually 26 cents-per-mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile; the standard rate for medical and moving purposes is based on the variable costs as determined by the same study. Runzheimer International, an independent contractor, conducted the study for the IRS. The mileage rate for charitable miles is set by law.

Mileage rates are not the extent of your deductible expenses for the business use of your car. Remember to include parking and tolls! See below.

Additional Vehicle Use Deductions: In addition to the standard mileage rates, you may deduct the costs of tolls and parking while using your vehicle for one of the approved purposes - these are separate deductions. However, if you have claimed vehicle depreciation, you may not deduct tolls and parking fees. For cars used by employees for business use, the portion of the standard mileage rate treated as depreciation is generally 26 cents per mile.

Did you know that you can also claim a tax credit for buying a hybrid or electric vehicle? The federal EV tax credit may earn you up to $7,500 back on your purchase.

Car Allowance and Mileage Reimbursem*nt

Sometimes, an employer may offer an allowance or reimbursem*nt if you use your vehicle for work. This can be done in two ways:

• Your employer pays you a vehicle allowance with your paycheck - usually a flat rate. This is considered taxable income and part of your gross pay.
• Your employer reimburses your mileage. If the employer follows the exact mileage rates based on a log kept by you as an employee, this may not be taxable.

Depreciation of Assets

Any equipment purchased specifically for your business is considered a capital asset. Because of this, vehicles are not the only business property which can be depreciated on a tax return; this also includes property like buildings, tools, computers, and furniture. The property or asset must be owned by you, used with the intent to produce income for your business, have a determinable useful life, and it must last or be expected to last more than one year.

This can be property that is used partially for business and partially personal use; for example, if you use your personal vehicle to travel for business. Depreciation begins when the property is placed into service and is claimed each year until it is either retired from service or you have fully recovered the cost or other basis - whichever comes first.

There are a few methods to depreciating property; eFile.com will help you select the method that benefits you the most. Simply answer some questions regarding your vehicle or other property and we will help you select how you should depreciate it. Depreciation is reported on Form 4562 - eFileIT on eFile.com.

Most assets are depreciated through Section 179 deprecation. The maximum 179 expense deduction is limited to $1,080,000, reduced by the amount exceeding $2,700,000 during the year it was put into service. Additionally, the 179 deduction is limited to $27,000 for the deprecation of sports utility vehicles.

To learn more about depreciation, see IRS Publication 946, How To Depreciate Property.

Deductible Business Miles

Deductible business use of your car does not cover normal commuting to your usual place of work. Qualified deductible business use includes:

• Driving to a business meeting away from your usual workplace
• Meeting clients or customers somewhere (lunch, their business or home, etc.)
• Getting from your home to a temporary workplace
• Driving for people or picking up groceries, food, or other items
• Getting from your regular workplace to a second workplace for the same job or business.

If you use your car only for your job or business, you may deduct all of the miles driven or actual vehicle expenses. However, if you also use the car for other purposes, you can only deduct the portion used for business purposes.

Normal commuting from your home to your regular workplace and back is not deductible. You may deduct business mileage only if you are traveling to and from a temporary work location, from one work location to another, to meet with a client, to a conference, etc.

Medical Transportation Expenses

Expenses for primary transportation to medical care facilities that qualify as medical expenses are:

• Actual fees or fares for a taxi, bus, train, or ambulance
• Out-of-pocket expenses for using your own car or the standard mileage rate
• Fees for tolls and parking.

Actual Car or Vehicle Expenses You Can Deduct

Instead of using the standard mileage rates, you may use the actual costs of operating your car by keeping accurate records. Qualified expenses for this purpose include gasoline, oil, tires, repairs, insurance, tolls, parking, garage fees, registration fees, lease payments, and depreciation licenses. Report these expenses accurately to avoid an IRS tax audit.

Keep records of your deductible mileage each month with a simple journal or mileage log. For your convenience, we have prepared a downloadable mileage log which you can print and fill out each month. You can use your mileage information to help you complete and e-file your tax return on eFile.com; the eFile app will determine whether or not you can deduct your mileage based on your answers to several simple questions. Then, the app will calculate your mileage rate for you and report it on your return.

Have more questions about deductible mileage rates and expenses? Ask an eFile.com Taxpert® your tax questions now!

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