IRS Mileage Rate 2022/2023
There are close to 600 million people today who classify as an entrepreneur. This is a type of business where you’re responsible for keeping your own records and handling your business finances. If you use a vehicle to get around at any point in your line of work, you are eligible for being partially reimbursed.
The Internal Revenue Service (IRS) issues new mileage reimbursement rates every year so that people know how much to write off on their taxes.
Here’s what you need to know about the IRS mileage rate 2022/2023 so you can take care of your business and prepare your taxes.
Table of Contents
What Is the IRS Mileage Rate 2022/2023?
Every year, the mileage rate is set in advance and goes into effect on Jan. 1. The current IRS mileage rate is 65.5 cents in 2023. This means that the government will pay you 65.5 cents for every mile that you log for your work. This is applied at tax time, and can significantly reduce the amount of taxes that you owe if you drive your vehicle a lot for work.
For example, if you drive and log 1,000 miles in 2023, you will receive $650 from the government. Handling your taxes is part of your to-do list each year, so start Q1 off by logging your miles and staying organized.
How Does This Compare To Previous Mileage Rates?
Since the mileage rate is decided on and set each year, there’s always the chance that there might be some significant fluctuations year after year. This is particularly true lately, as the financial recovery has been a big priority during COVID-19 and post-pandemic.
In 2022, the IRS mileage rate was 58.5 cents at the beginning of the year, and it was bumped up to 62.5 cents per mileage in the final 6 months of the year. In 2021, the IRS mileage reimbursement rate was 56 cents per mile. The mileage rates were 57.5 cents per mile (2020), 58 cents per mile (2019), 54.5 cents per mile (2018), and 53.5 per mile (2017) for the past few years, respectively.
As you can see, the rate generally goes up year after year, but there are always ebbs and flows.
How Can You Handle Your Mileage?
Now that you understand more about the IRS mileage reimbursement rate, it’s important that you set up some processes that can help you take care of it. Managing your mileage keeps your taxes under control and allows you to lower how much you owe so that you keep more of your money each year.
You’ll also be able to invest more when you’re able to handle your mileage and other aspects of your taxes. It all starts with understanding the IRS mileage rate and using this to your advantage.
These tips are worthwhile when you’re handling the process:
Stay Up-to-Date With The Current Rate
When you handled your 2022 taxes, perhaps your software let you know the mileage rate, or you might have found it out and then done your independent calculations. These rates change regularly and will require you to keep your ear to what’s going on with IRS laws and guidelines.
Compare the federal rate to any rate that your state charges as well. If your state has a higher rate, you will want to use it when you file your state taxes so that you can get the biggest rebate. Having the right information will allow you to handle your taxes accurately and in a way that is financially advantageous.
Maintain A Thorough Log
The best thing you can do to manage your taxes is by making sure that you keep a detailed log or journal. You can do this on a hard copy, use software, keep a spreadsheet, or any other method that works for you. The key is to make sure that your log is consistent and kept regularly.
By letting time get away without managing your logs, you are more likely to make mistakes, keep imprecise records, or lose out on miles that you otherwise would have been entitled to. If your logs are too inaccurate you might even deal with an audit, which becomes an issue if you can’t produce accurate records.
Keeping a neat and organized mileage log makes the rest of your taxes so much easier. Do your due diligence so that you develop habits of staying organized as a professional.
This applies both to entrepreneurs and people who work full-time for a company but use their vehicle in their line of work. Your vehicle might be used throughout your regular course of work as the main part of your job, or you may just log miles when you make office runs or travel to different work sites.
You can’t write off your regular commute to and from work or other common uses of your vehicles. You can save and invest more when you stay on top of your taxes and put it into writing with a log.
Look Into Apps That Can Help
If you really want to make your mileage logs easy, there are plenty of apps that you can use that will let you set it and forget it. These apps use your phone’s GPS technology and will traffic your specific routes so that your mileage logs are kept to the smallest increment of a mile.
You can access the app at the beginning of the ride so that it knows to classify the trip. You could also always keep the app on, and then go into it later to differentiate between business travel and personal trips. Many of these apps will calculate your reimbursement in real-time so that you don’t have to wait to do cumbersome number crunching later.
It saves you time and energy, and you are more likely to get precise calculations. These apps also let you export documents directly into your tax software, or as a PDF or other document to use for your records. Having access to these mobile apps makes your calculations quick and effortless so that you can go about your business without shifting your focus.
This way, you’ll be prepared for the upcoming 2023 tax season when it rolls around rather than being caught off-guard.
Use The Highest-Quality Tax Software
Next, make sure that you are also using the best tax software that you can get your hands on. Many of these tax programs have a mobile app to go with it so that they are always synced and accurate.
They often have mileage reimbursement functions that are particularly handy for entrepreneurs. Regardless of how you compile your mileage, you will be able to address your taxes with less effort and based on the type of business you run. The best tax software producers today offer platforms for people who work from home, operate as independent contractors, LLCs, individuals with real estate and stock investments, and more.
Choose tax software that is accountant-approved and that gets high marks from people from all areas of business.
Look Into Tax Write-Offs At Every Turn
When you file your taxes on-time and accurately, you stand the biggest chances of staying ahead of the curve with your taxes and will be less likely to run into tax trouble later on. One of the best things that you can do is look into tax write-offs of all types, including others that work with your automobile.
For instance, you might also choose to write off the depreciation of your vehicle or pay for the individual repairs that you put into the car. Typically, the IRS will allow you to write off certain types of vehicle write-offs but not all of them at the same time. It makes sense to calculate your write-offs in different categories to see which will give you the biggest rebate.
From here, you can decide which write-off to take so that it is in your best interests. Regardless of which write-off you choose, make sure that you have records for each one. This way, if you’re ever audited or if you need to prove your deductions, you’ll be in a position to do so.
Keep Up With Your Automobile
Always do your best to keep up with your automobile so that there’s never an issue with getting where you need to go and claiming mileage. It’s helpful to mark an odometer reading at the beginning of the year and then note the difference by the end of the year. You can also keep up with your readings on a weekly, monthly, or quarterly basis so that you have clean records that substantiate any mileage that you claim on your logs.
You put yourself at a disadvantage if you happen to lose the use of your vehicle during the year. When you have to switch vehicles or methods of transportation, it makes your logs a little less clear, which can cause more work for your taxes. Make sure to stay on top of your oil changes, transmission flushes, and any other parts of your vehicle so that you can keep it on the road and get the most from your work.
Hire The Help Of A Certified Public Accountant (CPA)
One of the easiest ways to manage your mileage is to hire the help of a certified public accountant (CPA). Working with a licensed and insured CPA allows you to substantiate any mileage that you’re claiming, while also getting another set of eyes on your calculations.
Your CPA can keep copies of your mileage logs and will make sure that your write-offs are always taken care of. Work with your CPA throughout the year and check in with them regularly so that your records are clean and so that you are prepared to handle your taxes correctly.
Just like you have a morning routine to help you stay productive and consistent, you need a system for handling your taxes. A CPA can assist you with your finances and will make sure that you’re always getting the biggest returns available. Do yourself a favor and handle your own thorough calculations, and then use your tax accountant as a check and balance to assist you.
Create Backups For Your Logs And Records
It’s also helpful to create multiple backups of your logs and documents so that you don’t lose any precious calculations or mileage information. Keep hard copies and digital records, or make sure that you have your logs both in the cloud and on a hard drive somewhere.
You won’t have to panic if you happen to lose your records or if you deal with a hard drive crash or other issues. Always send backup copies to your accountant and keep them in different locations so that you never have to worry about your information being lost or compromised.
Also, consider the details any time the rate and laws change. For instance, in addition to the rate changing, the government might also change the different types of trips you are able to classify. Plan out your car trips in advance and know the work purpose of each use of your vehicle. Note this in your logs each time.
Managing Your Taxes On Your Terms
Now that you understand the IRS Mileage Rate 2022/2023, you will have a headstart when it comes time to tackle your taxes.
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