Buckle up – the standard mileage rates for deducting the costs of operating an automobile for business purposes have increased for 2023.
Mileage rates by Use
Beginning Jan 1, 2023, the standard mileage rates as outlined in Notice 2023-03 are as follows:
- Business use: 65.5 cents per mile. This has increased from 62.5 cents in the second half of 2022.
- Medical/moving purposes: 22 cents per mile for Armed Forces members who qualify as active duty. There is no change since the midyear rate increase in the second half of 2022.
- Charitable services: 14 cents per mile which means there was no increase over the 2022 mid-year increase.
Which automobiles are covered by standard mileage rates?
Automobiles powered by gasoline and diesel are covered by the standard mileage rate, as are electric and hybrid vehicles. These mileage rates are optional – taxpayers are always able to calculate the actual costs of operating their vehicle instead of choosing to use the standardized rates.
In general, if the car is being used in the first year for business purposes the taxpayer must use standardized mileage rates if you want the ability to switch between actual costs and the standard business mileage rates in future years. From there, in subsequent years, they can choose between standard mileage or actual costs. However, calculating actual costs involves additional legwork that may not be worth the trouble. For leased automobiles, if the taxpayer opts for standard mileage rates, this must be applied consistently throughout the lease period, including if the lease is renewed.
What exceptions do employers and employees need to consider?
One exception to consider is the change to unreimbursed employee travel expenses that are still in effect under the Tax Cuts and Jobs Act (TCJA) from tax years after December 31, 2017, to before January 1, 2026. Mileage cannot be claimed as a miscellaneous itemized deduction under this category. Moving expense deductions also can’t be claimed by anyone except active-duty Armed Forces members who are ordered to move to a permanent change of station.
