The IRS this week announced that the Standard Mileage Rate will go up from 58 cents pe rmile to 62.5 cents per mile.
To use the Standard Mileage Rate, taxpayers must choose this method over the Actual Expenses deduction in the first year a vehicle is owned and used in the business.Then in the following years, taxpayers can choose either the standard mileage rate or actual expenses deductions. Note that if you choose the Actual Expense Method in the first year a vehicle is used for business then you cannot go back to the Standard Mileage Rate.
This preset Standard Mileage Rate is set up by the IRS to include depreciation, lease payments, repairs and maintenance, gas, oil, insurance and vehicle registration fees. Not included are parking, tolls and interest. These can be deducted in addition to the Standard Mileage Rate on your business income tax return.
Many of my clients choose the Standard Mileage Rate as they find it easier and simpler to track their business miles each year either with a good old fashioned notebook or some prefer apps like MileIQ, than to keep receipts and documents their actual business expenses.
Which is best for you and your business?
I do recommend you discuss this strategy and best practices with your tax advisor. Given the huge increase in gas prices we have seen over the last 6 months, many taxpaers will get a bigger tax deduction by keeping receipts and deducting their actual expenses.
Find more Resources and Worksheets on our Website to help you in tracking your Vehicle Expenses. AND ofcourse reach out anytime with specific questions. We offer both group programs and one on one consulting services.