The standard business cents-per-mile rate is adjusted annually. It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, such as gas, maintenance, repairs and depreciation. Occasionally, if there’s a substantial change in average gas prices, the IRS will change the rate midyear.
On December 21, 2023, the national average price of a gallon of regular gas was $3.12, compared with $3.10 a year earlier, according to AAA Gas Prices. The increased tax deduction partly reflects the price of gasoline, which is about the same as it was a year ago. Consequentially, the IRS recently announced that the 2024 standard business mileage rate for the use of a company car, van, pickup or panel truck will be 67 cents (up from 65.5 cents for 2023).
Standard Rate vs. Tracking Mileage
Businesses can generally deduct the actual expenses attributable to business use of vehicles like gas, tires, oil, repairs, insurance, licenses and vehicle registration fees. Businesses can also claim a depreciation allowance for the vehicle. However, in many cases, certain limits apply to depreciation write-offs on vehicles that don’t apply to other types of business assets.
The cents-per-mile rate is helpful if you don’t want to keep track of actual vehicle-related expenses. However, you still must record the mileage for each business trip, the date and the destination.
The standard rate is also used by businesses that reimburse employees for business use of their personal vehicles. Under current law, employees can’t deduct unreimbursed employee business expenses, such as business mileage, on their own income tax returns. So, reimbursements can help attract and retain employees who drive their personal vehicles for business purposes.
If you use the cents-per-mile rate, keep in mind that you must comply with various rules. If you don’t comply, reimbursements to employees could be considered taxable wages to them.
More Need-to-Knows
Claiming deductions for business vehicle expenses involves several considerations, and the choice between using the standard mileage rate or other methods depends on various factors. It's crucial to take into account past deductions for the same vehicle, whether the vehicle is new to the business in the current year, and if you wish to take advantage of specific first-year depreciation tax breaks.
The decision on whether to use the standard mileage rate or other methods is complex and depends on individual circumstances. Seeking professional advice or guidance can be beneficial, especially when dealing with tax implications and deductions. If you have questions about tracking and claiming business vehicle expenses in 2024 or need assistance with claiming 2023 expenses on your tax return, we recommend consulting with your VAAS CPA or trusted accountant to provide personalized advice based on your specific situation.