Business owners will be able to deduct three cents more per mile in 2023 when operating vehicles for business use, according to the Internal Revenue Service (IRS).
The IRS recently announced the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes. The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. As of January 1, the standard mileage rates for the use of a car (also vans, pickup trucks, or panel trucks) will be:
- 65.5 cents per mile driven for business use, up 3 cents from the midyear 2022.
- 14 cents per mile driven in service of charitable organizations, unchanged from 2022.
These rates apply to electric, hybrid-electric, gasoline, and diesel-powered vehicles.
“It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses,” explained Frank Stitely, Stitely & Karstetter CPAs Managing Member and Business Advisor.
He added that self-employed taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
“Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use.,” he continued. “Then, in later years, they can choose either the standard mileage rate or actual expenses.”
Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.
The IRS document Notice 2023-03 PDF contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate plan. In addition, this notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023, for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.