Do you use your personal vehicle for business, charitable, or medical purposes? If the answer is “yes,” you could qualify for an income tax deduction. How much you can deduct and how you report the deductible expense depends on your situation. Generally, you can deduct qualified vehicle expenses that total the greater of actual expenses or a standard rate. Whether you deduct the standard rate or actual expenses, you must track your miles driven during the year.
Most people deduct their mileage deduction based on the standard rate because it’s easier and often results in a larger deduction amount. The standard deduction rate per mile is determined each year by the Internal Revenue Service based on data about the cost of operating and maintaining a vehicle, including passenger cars, vans, pickups, and panel trucks.
In recent years, the rate per mile has risen and fallen based on the price of gasoline. With gas prices up significantly since 2020, the mileage rates are up for next year, too. The IRS recently issued the new standard mileage rates for 2022 that reflect those higher gas pump prices.
Beginning on January 1, 2022, the standard mileage rates are:
- 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021
- 18 cents per mile driven for medical or moving purposes, up 2 cents from the 2021 rate
- 14 cents per mile driven for charitable purposes to serve a qualified tax-exempt organization. The charitable rate is set by statute, so it doesn’t change.
Using the standard mileage rate can really add up to a substantial tax deduction. Remember that you always have the option of calculating the actual costs of using your vehicle and deducting the higher of the two options. Also, you can choose the standard mileage rate one year and actual expenses the next year, whichever is more beneficial for you.
No matter which of the two expense methods you choose, you must track your overall mileage driven during the year, and track the miles by category (e.g., business and personal). And if you use more than one vehicle, mileage must be tracked for each vehicle you use for business, charitable, or medical.
Taking vehicle deductions for business, charitable, or medical purposes involves a lot of tracking, but the effort can be worth it. You can use mileage tracking apps to help. Once you get your tracking system down, you’ll see that those mileage deductions can add up and reduce the bottom line on your taxes.