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The Standard Mileage Rate helps you deduct costs for using your car for work, charity, health, or moving. It offers a simple way to figure out how much money you can save on your taxes.
Understanding the Standard Mileage Rate
The IRS sets Standard Mileage Rates each year. These rates tell you how much you can deduct for each mile you drive for certain specific reasons. Think of it as a set price per mile for using your car. You use this rate instead of keeping track of every single car cost, like gas, oil changes, and repairs. This makes tracking much easier for many people.
Who Can Use the Standard Mileage Rate?
Many people use the IRS Mileage Rate. It’s very popular with self-employed individuals. This includes freelancers, independent contractors, and small business owners. If you use your car for your business activities, you can likely use this method to deduct your car expenses.
However, things changed a few years ago for most employees. Because of the Tax Cuts and Jobs Act (a law passed in 2018, most employees can no longer deduct the miles they drive for work. This is a common question people have. Commuting to your regular job is also never deductible. But if you are an active-duty member of the Armed Forces and move because of military orders, you might be able to deduct moving miles. Certain charitable and medical driving can also be deducted.
So, if you work for yourself or are in a specific situation like the military, you might be able to use the Standard Mileage Rate. If you are an employee, it’s less likely that you can deduct your driving unless it falls into a special category.
How the IRS Sets the Rate
The IRS doesn’t just pull these numbers out of thin air. They work with a company called Motus to figure out the actual costs of owning and running a car. These costs include:
- Gas prices: This is a big one and often causes the rate to change.
- Insurance: How much it costs to insure a car.
- Maintenance: Things like oil changes, tires, and repairs.
- Depreciation: This is how much a car loses value over time. Part of the business mileage rate is specifically for depreciation.
FAQ
What is the IRS standard mileage rate?
The IRS standard mileage rate is a fixed per-mile reimbursement figure (set annually) that taxpayers and employers use to calculate deductible vehicle expenses to claim mileage on their taxes without tracking actual costs.
How often does the standard mileage rate change?
The IRS updates the standard mileage rate each year—typically announced in December for the following calendar year—based on factors like fuel, maintenance, insurance, and depreciation costs.
When should I use the standard rate versus actual vehicle expenses?
Use the standard rate for simplicity or when you drive a newer, fuel-efficient vehicle; choose actual expenses if your total costs (fuel, repairs, depreciation, insurance) exceed what the standard rate would reimburse.
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