How You Can Benefit From Mileage Tax Deductions

tax on mileage

There are many deductible tax write-offs that a self-employed individual can take advantage of to lower their taxes. One of them is mileage tax deductions for your driving expenses. 

In this article, we’ll help you better understand how mileage tax deductions work and how much money you can save from claiming them. 

Related: Your Ultimate Guide to Travel Expenses

What is a mileage tax deduction? 

The mileage tax deduction is what you can claim on your tax return if you use a vehicle for business purposes and meet specific criteria. 

Mileage can be written off in whole or in part. You can deduct 100% of your mileage on your tax return if you have a dedicated car that you solely use for work. If you have a personal vehicle that you occasionally use for business, you can only deduct the miles you drive while working. However, it’s important to remember that the miles driven between your home and workplace don’t count as business mileage.

Who is eligible for mileage tax deduction?

Employees used to be able to claim a tax deduction for mileage and other expenditures not reimbursed by their employers. However, the Tax Cut and Jobs Act (TCJA) of 2017 repealed the deduction for employee business costs and changed the mileage deduction regulations, making it impossible for most employees to deduct mileage and other unreimbursed expenses.

So who is eligible for mileage tax deductions now? Here is your answer:

  • Small business owners. 
  • Self-employed taxpayers who file Schedule C or Schedule F.
  • Other self-employed workers including independent contractors, e.g., drivers for rideshare services.
  • Qualified performing artists, reservists in the armed forces, and fee-based government officials.
  • Individuals traveling for volunteer work or medical appointments.

How to deduct a mileage deduction

Depending on your circumstances, you can deduct mileage from your taxes in different ways. 

For example, you can’t claim mileage as a medical or charitable expense the same way as a business expense. You will need to use different forms, and the amounts you can deduct per mile will vary.

To claim a mileage deduction, you can opt for one of the following methods: 

1. The standard mileage rate

To know how much you can deduct with this method, simply multiply your business miles by the IRS’s mileage rate. 

The standard mileage rate writes off a certain amount for every mile you drive for business purposes. For the 2022 tax year, you can deduct $0.585 per mile driven (up from $0.56 in 2021).

2. The actual expense method

Rather than getting a fixed fee for the miles traveled, this method allows you to deduct the expenses of using a vehicle for business purposes. They may include:

  • Gas
  • Oil
  • Repairs
  • Insurance
  • License fees
  • Registration fees
  • Vehicle depreciation

The actual expense method may necessitate more documentation, but it can result in a bigger deduction than the standard mileage rate.

You should calculate your mileage tax deductions with both methods to find out the one that benefits you the most.  

How Shoeboxed can help you stay on top of your mileage tax deductions

Keeping receipts organized and safe is vital during the tax season as they are your concrete evidence for any tax deductions you claim. 

If you’re tired of spending hours and hours collecting and categorizing receipts by yourself, we’re here to tell you there’s a super easy alternative. It’s Shoeboxed

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About Shoeboxed

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes. More importantly, Shoeboxed helps you track mileage using your phone’s built-in GPS for unmatched ease and accuracy.

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