What is a mileage rate?
Having a business means driving around and showing up at places where you get noticed and hopefully generate more revenue. The IRS website defines the mileage rate as the cost used to calculate deductible costs of using an automobile for business purposes. The rate is also used to reimburse your employees for their fuel expenses.
What does it mean?
IRS recognizes that there is a cost to running a business and wants to reimburse you for the mileage you put in. This rate is determined every year to keep pace with the price of gas. For 2023, the standard business mileage rate increased by 3 cents to 65.5 cents per mile. Source: IRS issues standard mileage rates for 2023; business use increases 3 cents per mile | Internal Revenue Service
What if I have an electric or hybrid car?
These rates also apply to electric and hybrid cars. Alternatively, you can also take a deduction by calculating the actual costs of using your vehicle rather than using the standard mileage rates.
Rates are different when taking reimbursements for medical and volunteer work.
There are many other nuances to this and other business-related expense deductions, so be sure to check with your tax accountant. Use this blog as a reminder for you to bring it up with your tax accountant.