If driving is an essential part of your job, you may qualify to deduct the cost of travel on your federal income tax return. The Internal Revenue Service (IRS) annually adjusts the allowable deductible mileage rate for inflation.
Below are eight easy steps that you can follow to claim this tax deduction.
Key Takeaways
- The IRS allows taxpayers to claim deductions for the use of a vehicle.
- The standard mileage deduction requires you to log odometer readings from the beginning and end of a qualifying trip, along with its purpose and date.
- Taxpayers can also claim vehicle expenses, such as lease payments, insurance, gas, and tolls.
- Qualified expenses are eligible if you drive for business or medical purposes, move as an active-duty military member, or work for a charitable organization.
1. Make Sure You Qualify for Mileage Deduction
The most common reason for claiming the mileage deduction is travel from the office to a worksite or from the office to a second business-related location. You can also claim the deduction if you're using your vehicle to:
- Conduct business-related errands
- Traveling to and from medical appointments if you take the deduction for medical expenses
- Move between posts if you're an active member of the military
- Work with charitable organizations
In addition to mileage, you can claim unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI).
2. Determine Your Method of Calculation
You can choose between two methods of accounting for the mileage deduction amount. The first is the standard mileage deduction, which requires tracking how many qualified miles you drive during the tax year. The second option is to claim deductions for vehicle expenses while performing qualified activities.
To claim the standard mileage deduction, you must maintain a log of your qualifying miles. Mileage rates for the 2023 tax year include:
- For business: 65.5 cents per mile
- For medical or moving for qualified active-duty Armed Forces members: 22 cents per mile
- For charitable organization services: 14 cents per mile
To claim the deduction for vehicle expenses, you must retain all receipts and relevant cost of driving documentation. You can factor in depreciation, lease payments, registration expenses, oil and gas, repairs, tires, tolls, parking, insurance, and any other costs that are directly related to your vehicle.
3. Record Your Odometer at the Start of the Tax Year
To take the standard mileage deduction, you'll have to report the total miles the vehicle was driven in the tax year. This figure is reported on Form 2106: Employee Business Expenses. Record the vehicle's odometer at the beginning and the end of the tax year.
But what if you purchase a used vehicle mid-year? In this case, record the odometer reading from the first day it is deployed until the end of the tax year.
An employee cannot claim the cost of a vehicle as an "unreimbursed employee travel expense as a miscellaneous itemized deduction" between December 2017 and January 2026.
4. Maintain a Driving Log
You must keep a log of the total miles driven if you choose the standard mileage deduction. The IRS specifies:
- At the start of each trip, record the odometer reading and list the purpose, starting location, ending location, and date of the trip.
- After the trip, the final odometer must be recorded and then subtracted from the initial reading to find the total mileage for the trip.
Your mileage log must be precise and maintained consistently.
5. Maintain a Record of Receipts
If you choose the actual expense deduction, you don't need to maintain or record your mileage. Instead, keep copies of relevant receipts and documentation. Each document must include the date, dollar amount of the service or service purchased, and description of the product or service needed. The expense must be incurred within the tax year you submit the claim.
6. Record Your Odometer at the End of the Tax Year
At the end of the tax year, you should record the ending odometer reading. This figure is used in conjunction with the odometer reading at the beginning of the year to calculate the total miles driven in the car for the year. The information, including the percentage of miles driven for business purposes, is required on Form 2106.
7. Record Mileage on Tax Return
When completing your tax return, list the total miles driven on Form 2106, Line 12. This figure is calculated by the standard mileage rate allowed by the IRS to determine the dollar deductible amount.
If you're using the actual expenses method, you'll need to group receipts of your expenses by gasoline, oil, repairs, insurance, vehicle rentals, and depreciation.
8. Retain the Documentation
You must retain the documentation relating to a mileage deduction for at least three years for the IRS. Make sure you keep copies of the records and a personal copy and create a new log for each tax year.
What Is the Federal Tax Deduction for Mileage?
For 2023, the federal tax deduction for mileage is 65.5 cents per mile for business use, 22 cents per mile for medical purposes and if you're claiming moving expenses as an active military member going to a new post, and 14 cents per mile for charitable services.
Is It Better to Claim Mileage or Gas for Taxes?
Claiming mileage or gas for taxes depends entirely on your situation. If you choose to take the standard mileage, you can claim 65.5 cents per mile during 2023. If you want to claim gas, you must keep all your receipts. You can also claim other vehicle-related expenses, such as insurance, depreciation, lease payments, parking, toll, and repairs. You are not permitted to claim mileage and expenses at the same time.
What Is the Tax Deduction for Medical Mileage and When Volunteering?
For 2023, the tax deduction for medical mileage is 22 cents per mile. The same rate applies to active duty military members who move to a new post. For those who volunteer, the tax deduction for mileage for the tax year 2023 is 14 cents per mile.
The Bottom Line
If you qualify, you can claim mileage or vehicle expenses on your tax return. Your choice depends on how often and how far you drive for business, medical care, or volunteer work. The IRS requires clear and concise documentation to support your claims.
