The Internal Revenue Service is making deductibles for work-related driving costs a little more generous for 2023.
Come tax time, eligible taxpayers rely on the tax agency’s standard mileage rate to determine the deductible costs of using an automobile for work purposes.
For 2023, the rate is climbing three cents to 65.5 cents per mile, the IRS recently announced.
The IRS announcement on standard mileage rates is a yearly event. But as gas prices broke records last year, the tax agency made a rare mid-year increase to the rate.
Gas prices, on average, are back at less painful prices. Wednesday’s national average was $ 3.26, versus $ 3.28 one year earlier, AAA data showed. But rising inflation is still pinching many wallets.
Most employees commuting to their job cannot use the deduction, H&R Block HRB, +2.75% noted. But the categories of taxpayers who can still opt to claim the mileage as part of their business expenses include small business owners and self-employed workers like independent contractors such as ride-share drivers, the national tax-preparation company said.
Even for eligible taxpayers, the rules only apply to work-related trips from the office during work hours to, for example, visit a client, the company noted. The rules do not apply to the initial trips to/from the office.
Taxpayers have the choice of tallying up their actual vehicle-use costs, instead of the optional standard mileage rate, the IRS noted. Either way, however, the IRS will still be expecting records of miles traveled and costs incurred, experts say.
The optional standard mileage rates apply to the eligible business uses of electric and hybrid vehicles in addition to gasoline- and diesel-powered vehicles, the IRS noted.