Optimize Your Deductions with the New Mileage Rate for Small Business Owners

August 30, 2022

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For New Jersey business owners who frequently travel for work, the recent increase in the optional standard mileage rate presents an opportunity to maximize deductions on your taxes. The IRS recently announced changes to the mileage rate for business travel, effective July 1st, 2022. If you’re a business owner that’s on the move often, it’s important to understand how this change can impact your taxes. This article will provide tips on taking advantage of the new mileage rate.

The IRS has announced a new mileage rate for business travel – 62.5 cents per mile. This is a 4-cent increase from last year’s rate. This change is in recognition of recent gasoline price increases. The IRS notes that while fuel costs are a significant factor in the mileage figure, other items such as depreciation and insurance enter into the calculation of mileage rates.

For business owners, the new mileage rate presents an opportunity to deduct a larger portion of your travel expenses on your taxes. When tracking your business travel expenses, it’s important to keep accurate records of your driving. This includes keeping track of your starting and ending odometer readings and the purpose of your trip. Using the standard mileage rate, you can’t deduct vehicle expenses such as gas and oil.

For example, let’s say you own a small business and travel 100 miles round trip for a business meeting. At the end of the year, you would multiply 100 miles by the new mileage rate of 62.5 cents, resulting in a deduction of $62.50 for business travel expenses.

Another important tip is to be aware of the different types of deduction available. The new mileage rate applies to business travel, but other types of deductions are also available. For example, you can also deduct medical and moving expenses, as well as charitable miles driven. The IRS has a comprehensive list of the different types of deductions available.

It’s also important to note that using the new mileage rate is optional. If you prefer to calculate your vehicle’s actual costs instead of utilizing the mileage rate, you have the right to do so. Some business owners who have substantial travel expenses would rather deduct their actual costs for gas and oil rather than use the standard mileage rate.

The new mileage rate provides an opportunity for business owners to deduct a larger portion of their travel expenses on their taxes. When planning your deductions, it’s important to keep accurate records of your driving and be aware of the different types of deductions available.

At Axiom CPAs, we can help you navigate the new rate and determine which deduction option is best for your business. Whether you’re a business owner traveling often or have other business-related deductions, we can help you maximize your tax savings. Contact us today to learn more about our services.