Example: You’re in the 12% tax bracket and have 1,000 business miles to report on your 2022 tax return. You drive 500 miles the first six months of 2022, which will be recorded using the 58.5 cents rate. You drive another 500 miles the second six months of 2022, which will be recorded using the 62.5 cents rate.
The 58.5 cents mileage rate results in a $292.50 tax deduction for you. Since you’re in the 12% tax bracket, this deduction will lower your taxes by $35.00.
The 62.5 cents mileage rate results in a $312.50 tax deduction for you. With a 12% tax rate, this deduction will lower your taxes by $37.50, which is $2.50 or 7% more than the $35.00 deduction you received for the first six months of 2022.
The IRS mandates that you track your vehicle expenses as they happen (this is called contemporaneous recordkeeping). You’re not allowed to wait until right before filing your tax return to compile all the necessary information needed to claim a vehicle deduction. Whether it’s a physical notebook you stick in your glove compartment or a mobile phone app, pick a method to track your mileage and actual expenses that’s most convenient for you.
So be sure to keep great records so you can take advantage of this increase to the business, medical and moving mileage rates.
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