The standard mileage rate is an IRS-approved method of calculating the deductible costs of operating a vehicle for business, medical, or charitable purposes. This rate, which is updated annually, allows taxpayers to deduct a certain amount for each mile driven for approved purposes. This simplifies the process of claiming deductions for qualifying expenses.
How Does the Standard Mileage Rate Work?
When using the standard mileage rate, taxpayers are allowed to deduct a certain number of cents per mile for each trip they take during the tax year for approved purposes. This rate changes yearly and is determined by the IRS based on the average cost of operating a vehicle. Taxpayers may elect to use the standard mileage rate instead of itemizing the actual costs of operating their vehicle when claiming deductions.
What Qualifies for the Standard Mileage Rate?
Generally, business trips, medical trips, and charitable trips qualify for the standard mileage rate. Business trips include running errands for your job, going to conferences or meetings, and inspecting properties for investment purposes. Medical trips include trips to the doctor as well as trips for receiving medical treatment. Charitable trips include delivering meals to those in need or providing free services.
Tips for Maximizing Standard Mileage Rate Deductions
To take full advantage of the standard mileage rate deductions, be sure to keep accurate records of all your trips. Note the starting point, ending point, and purpose of each trip. Keep track of your total miles each year and use it to calculate your deductions based on the current rate. Be sure to only take deductions for legitimate trips. And remember that you are still able to claim certain other vehicle-related expenses – such as fuel, parking, and vehicle registration fees – on top of the standard mileage rate.
Things to Consider Before Using the Standard Mileage Rate
When considering whether to use the standard mileage rate or to itemize all of your vehicle-related expenses, keep in mind that the IRS’s rate may not reflect the actual cost of your vehicle-related expenses. Your actual expenses could be lower or higher than the amounts deducted through the standard mileage rate. To determine if itemizing expenses is right for you, it is best to discuss your options with a tax professional.