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By Dr. James M. Dahle, WCI Founder
One of my favorite tax deductions is to deduct mileage used for business. If you are driving your car for business, you can deduct 58.5 cents in 2022 (up from 56 cents in 2021) for every mile you drive. That's pretty generous, considering that $4 per gallon gasoline for a car that gets 30 miles per gallon costs you 13 cents per mile. Obviously, there are other expenses associated with driving a car including maintenance, repairs, depreciation, and insurance, but give me a break: 58.5 cents is awesome.
How Much Is the Business Mileage Deduction Worth?
Imagine you own a $2,000 car. Now assume a 40% marginal tax rate. How many miles do you have to drive the car to pay for the car? Answer—9,091. Many business owners drive twice that every year. Even if you subtract 13 cents a mile for gas, it's only 11,905 miles to pay for the car. Even a $2,000 car is going to last 12,000 miles. The best part about this deduction is that they give it to you for something you have to do anyway. It's basically free money.
How Does the Business Mileage Deduction Work?
Here's how the deduction works. This is from IRS Publication 463 [2022].
The basic rule is that you can't deduct your commute, but you can deduct everything else.
Commuting vs Business Miles
If you work at two hospitals, for instance, you can't deduct driving into the first one or driving home from the second one, but you can deduct the miles between them. You have to be a business owner, too—paid on a 1099 or a K-1, not a W-2. Unreimbursed employee expenses have never been as valuable since they were subject to the 2% of income floor on Schedule A. Even that went away from 2018-2026—except for reservists, musicians, and actors with multiple employers; fee-basis state/local government officials; disabled employees (costs related to their disability); and educators (up to $250 a year).
Is There a Limit on Business Mileage Deduction?
As long as you're driving for business (and, again, your daily commute doesn't work), there is not a limit on business mileage deduction. But be sure to keep a log that includes where you're going, the date of the trip, and the odometer reading before you start and after you're done, so you have concrete evidence for how many miles you can deduct.
Can You Claim Mileage to and from Work? My Scheme Foiled
Initially, I had this great scheme. Since I have a home-based business (The White Coat Investor), I had a plan to “commute” down the stairs to the home office, then drive “between my businesses” to the hospital and back to my home office, then commute back up the stairs. Unfortunately, it turns out you can't do this. If one of your sites of business is your home office, there is an additional requirement. Both jobs have to be in the same industry—mine are not. It's too bad since it would be worth at least a few hundred dollars a year to me.
I did manage to get a few miles for each business, but it was nowhere near the mileage I drive between my home and the hospital.
Charitable Deduction Mileage Rate
There are other miles that you can deduct as well. Mileage driven for a charitable cause is deductible at 14 cents [2022] a mile. Mileage for medical care (receiving, not giving, and subject to a 10% floor on Schedule A) and moving is deductible at 18 cents [2022] a mile. It's not quite the business mileage deduction, but it's better than a kick in the teeth.
Actual Expenses
You can deduct your actual expenses for business miles instead of the standard 58.5 cents per mile. But you're going to have to be spending an awful lot on your car to beat that 58.5 cent figure. Besides, who wants to keep track of all that? It's bad enough that you have to keep a mileage log. But if you're driving a fancy Audi or Tesla or leasing just about anything, perhaps it would be worth the hassle. Depreciation, car loan interest, and lease payments certainly count toward the actual expenses. You'll just have to decide whether it's worth it to figure all that out, rather than take the standard mileage deduction.
The Mileage Log
If you get audited, you'll need to show the mileage log you're supposed to be keeping. This is supposed to be kept contemporaneously (meaning you write it down when you drive the miles, not reproduce it later). You need the date of the trip, the mileage of the trip (preferably with beginning and ending odometer readings), and the purpose of the trip.
Can My Business Pay for My Car?
Lots of people have heard that your business can lease or even buy your car and have it work out well. Unfortunately, many people are abusing this, and their practice would never hold up in an audit. You cannot have your business buy and pay for the car (essentially paying your transportation costs with pre-tax dollars) and then use it personally. It can ONLY be used for business purposes. Again, commuting is NOT a business expense. Only the business use is a business expense; the rest is taxable income to you. If you're claiming 100% business use for the car, expect an audit. Almost nobody uses their car ONLY for business use. So again, you'll have to keep a mileage log for both business and personal use and then multiply your actual expenses by the ratio of business miles to total miles.
Brand new trucks and large SUVs used more than 50% for business (defined as a vehicle with a gross vehicular weight [not curb weight] more than 6,000 lbs—a Chevy Suburban barely qualifies) are eligible for special depreciation rules. Basically, you can deduct up to $25,000 of depreciation in the year you buy it rather than only 58.5 cents a mile, although it is decreased by non-business use. In addition, all vehicles are currently eligible for 100% bonus depreciation for both new and used (if new to you) vehicles through the end of 2022. Again, this is decreased by non-business use.
How to Deduct Mileage on Taxes
When filing taxes, you'll need to use Form 2106. On line 12, you'll enter the total number of miles, business or otherwise, that you drove your vehicles that year. On line 13, you'll note the number of business miles you drove. On line 14, you'll divide line 13 by line 12 to determine the percent of business use. On line 22, you'll multiply the number of business miles (on line 13) by the mileage rate for that year to determine your business mileage deduction.
The bottom line is that business miles can be a fantastic business deduction, especially on an inexpensive car. Just remember the main rules—only business miles count as a business expense and commuting is never business mileage.
What do you think? Do you deduct business mileage? Any tips for maximizing this deduction? Comment below!
[This updated post was originally published in 2013.]
Thank you both for the response. I’ve been reading the IRS doc on the home office deduction, and I think I do satisfy all 3 criteria, so I will be discussing again with my CPA.
I have a eBay resale business and a qualified Home Office. I source my inventory mainly from local thrift stores, about 12 or so that I visit a least once per week and a few of those as often as 3-4 times a week. I also must go to the Post Office almost every week day.
1.) The grocery store nearest my home has a self-serve PO kiosk where I often drop off packages. If while there I buy some groceries can I still claim that round-trip mileage?
2) The thrift stores I visit weekly are spread all over my metropolitan area so there is almost no *personal stop* I might need to make that isn’t directly on the way to or from one of my business stops. (Other than the negligible distance from the street to a parking space the personal stop would not increase my mileage at all). Does making that personal stop in between 2 thrift stores disqualify any or all of my business mileage?
3) Since my business mileage is well over 90% can I just document my personal mileage and subtract that from my total yearly mileage? (Much less paper work!)
I have searched online for about 8 hours and found only a few conflicting opinions and can find nothing on the IRS website.
1. Yes, I would deduct your mileage. If you want to prorate between business v. personal use, you can do so, but I can tell you that nobody I know of does this.
2. No, not if your personal stop is on the way between business trips.
3. That’s what some of our clients do and I’m fine with it (otherwise, they wouldn’t be clients), BUT you still need to keep records of your business trips, i.e. don’t simply subtract your personal miles from the 100%. If you are audited, you will be required to provide proof of busines purpose and miles driven for the other 90%.
8 hours? What is your time worth? Couldn’t you pay a CPA to prepare and sign your tax return and spend your time doing something you like, such as making money or having fun with your family? jmho
Half (or more) of the battle with the IRS is having proof that you have tried to comply with the rules and that you have kept adequate records to substantiate that you are. If you do that and, barring drawing an agent out to kick your dog because his cat just got kicked, you will be fine. The IRS is typically very reasonable. Of course, only the horror stories make for good copy.
Thanks so much for your helpful reply.
I was hoping to avoid needing to keep track of each and every business trip which is very onerous for me and will probably result in 600-800 separate entries a year. Whereas last month I had a grand total 36 purely personal miles in 3 whole trips. Life would be so much easier with only 40-50 entries a year — 1 piece of paper vs about 20!
I recall reading somewhere (quite a few years ago) about an actual Tax Court case where the defendant tracked only his personal mileage and the judge ruled it as acceptable. Wish I still had the book to reference it.
No paper necessary; there are many good apps you can use to track business mileage. Your problem in an audit is not that the IRS needs to verify personal use of your vehicle, but business use.
Great post and threads! Wondering if I could please get some thoughts on the following scenario…
I live and work in California. I soon will be setting up a PC and then joining two other docs (each with their own PC’s) as a partnership of corporations.
I drive 25,000 miles a year, but the vast majority (lets say over 95% for argument’s sake) is commuting or personal-use miles. I read an interesting article on the web — website is http://www.watsoncpagroup.com/kb/automobiles-and-llcs-s-corps-(superseded)_169.html. It seems I could get tax benefits/dollar savings off of my PC taxes by personally owning a car and leasing it to my individual PC.
Two questions come to mind:
(1) Is the approach of owning a car personally and leasing to my PC legit and worthwhile as the article would suggest?
(2) If #1 is OK, is it also OK to also deduct business miles off of my personal taxes?
Many thanks!
No matter how you slice it or lease it or whatever, you only get to deduct the business miles, not the personal miles and they’re not a personal deduction, they’re a business expense. You certainly can’t claim it as a business expense and a personal deduction.
As noted in the article, it’s all about the self-employment taxes, which for most docs is only going to be the Medicare tax- 2.9%. 2.9% of your business driving expenses probably isn’t very much.
This is a great read! The chart is very helpful. I do have a question that wasn’t addressed in this article. Say I have an employee who drives a company vehicle on a regular basis. Let’s say 2 to 3 times a week. In the mornings, she drives to work in her personal vehicle and drops her personal vehicle off, driving the business vehicle for the rest of the day. Depending on what time she comes home at night, and where she was during the day, sometimes it is more practical for her to drive the business vehicle straight to her house. At that point, the next morning she would drive the van back to the office. Distance wise, there is no difference. Her house is on the way to the office if she is coming the South. In other words, whether she had come to the office or gone to her house, then the office, the mileage would have been the same. At that point, we know that the commute from her house to the office is a non-deductible expense. However, does her stopping at her house for the night render the entire trip from her work location to her house non-deductible? There has been some debate over this, and we want to reduce the risk of audit!
Uh…..wow, that’s pretty gray. But I don’t think the mileage from the job site to her house or her house to the job site is deductible as a business expense. But I don’t know, because maybe you could offer it as a benefit to your employees (and include it with their taxable pay.) Probably a good idea to get a professional opinion on that one from a CPA.
I am an ED physician. I previously was totally contract at multiple sites. Last year 2 of the sites sold to a company and I became an employee with ownership in the company. I am paid with a W-2. One site is 96 hours per month and 60 miles from home and the other is 48 hours per month and 92 miles from home. I work 24 hours and start early in the morning so I have usually stayed overnight prior to the site that is furthest from my home. As a contractor, I deducted these stays overnight and still do when I work for another company doing contract shifts. I do maintain a home office that I deduct from my business/contract work. I do not have another “office site.” would these overnight stays be unreimbursed employee expenses? It does seem to be a second site for my primary job but miles away from my “tax home.” sorry so confusing. dh
It won’t matter next year, since that deduction is going away. But yes, I think they would be unreimbursed employee expenses.
I’ve enjoyed reading these comments.
I’m a W2 employee as a hospitalist as my primary job. I also have a second job as an assistant hospice medical director which I get paid as a 1099. As part of my hospice job I make home visits to patients, usually about 15-20 a month. Obviously my mileage for my commute to my regular hospitalist job isn’t deductible, but the mileage for traveling to and from my house calls for my hospice job would be deductible if I’m understanding this correctly? I also have a home office for my hospice job that I claim as a deduction, does that change things since I’d think hospitalist and hospice are in the same general field?
Thanks
Yes, you can certainly deduct the mileage from the office to the house calls and between house calls. If you claim the home office is the office, then all the miles from the home office to all the other places of work is also deductible.
I should mention that usually when I do the hospice home visits it’s during my off week from the Hospitalist job. So usually I’m going from my home to home visit, to home visit…. back to my home. Rarely if ever do I go from home to the Hospitalist job, then to a hospice home visit and so on.
Though it seems that since I’m claiming the home office deduction that none of that matters and all trips (including home to hospitalist job and then back home) would be deductible?
Yes, all of those miles are deductible. If you go from your hospitalist job to a hospice call, you can deduct the extra mileage – just reduce the total miles by the main job’s round trip miles. Your home office is a great place to maintain a good log of your drives from your office to your hospice visits.
I am an Emergency Medicine physician. I have a home office that is my principal site for administrative duties of my business (tax prep, business expenses calculations, etc) as well as CME. Is the mileage to and from the ED that I work at considered deductible?
As long as you can make the case to your auditor that you do work at the home office before and after every shift.
So I’m K1 partner and work majority of my time at hospital. However I 1099 weekly on the side and have a home office for separate company. Thinking of two scenarios: 1) should I establish a PO box and go there every AM before my commute to hospital to drop off my 1099 mail and return there in evening? or
2) does simply using my home 1099 office each morning before and after commute to hospital suffice?
IE do I need establish a PO box for miles to be deductible or not and would that even help?
Thanks
I’ve never seen 1099 used as a verb before.
I’d hate to waste my time going to the post office every day. 2 should work. Be prepared to defend it in an audit.
I think you missed the easiest and largest deduction for any vehicle! I was surprised it was not at the top of your list. First of all don’t use mileage! NO NO NO Never! Some vehicles really hold their value and depending on the year one can depreciate that vehicle with an accelerated method. This is a giant deduction on an expensive car But the “apparent” flaw is that one must depreciate each and every year including the first one by the % of actual miles driven!
This is a big gift from the IRS gods! The profession does not matter but lets use the example of a lawyer. He buys a vehicle 6000 lb qualifier. He takes out all of the dealer prepaymnet warrantees and service payments! Yes he is front loading everry penny of expense he can to include car washes.
At first this sounds stupid but it is really brillian! The attorney buys his vehicle on the last work week of the year! On one day he drives to work to the office close to his home which is a bummer because it doesn’t count to his % as it is a commute. He picks up some paperwork and then drives to either a client or another branch of his company maybe 200 miles away. If he plans it right he stays overnight into the next calendar year but that is not necessary.
Either the same day or the next day in the next year he drives home. By now you should have gotten the point which is tottally legal! In this example 99% of President Trump’s accelerated depreciation comes off that years taxes. All of the prepaid insurances, auto services, dent repairs for the lifetime of the car also come off in that year one that lasted just one day.
Now if he can posttpone his drive home into the next calendar year he is off to a good start building buisness miles. As I visit these sites I am flabbergasted at how many absolutely legal business or deductible miles are not included on anyone’s list.
Doesn’t business equipment require service? If one takes a break from work and then drives to the dealer for the service that that business equipment requires —- well to and from is business. If the lawyer has half a brain he stops on long trips and hands out his business card in every new city or local. Be sure to record the stop and who you spoke to. This is called prospecting.
If you are a painter all these same rules apply!
Auto write offs and I mean truly legal real deductible expenses should or can be a great deal higher than people imagine and most tax accountants aren’t much help explaining it or providing the list.
Oh and that Painter we spoke about. If he has his sign and address on his car with phone # and email he has a rolling billboard. The attorney could do the same of course but that might look tacky. Of course for tens of thousands of dollars of tax write offs is looking tacky a bad thing?
It would be really nice if others would add to this list of the things that make an auto or truck a great deductible. Last note! Keep records and don’t be lazy! This is not a trick it is about being super serious about your business! If all you are doing is joy riding in your car you don’t qualify or really deserve a deductible.
Remember rich people are not lazy!
Remember this post was written before accelerated depreciation was put in place too.
I must disagree with your extreme view on vehicle deductions, stated as follows, “First of all don’t use mileage! NO NO NO Never!” There are certainly appropriate times to take mileage, as well as appropriate times to take actual deductions. Your examples are all pointed towards expensive “physician” cars driven relatively few miles.
otoh, a fairly inexpensive car with high business mileage used for many years (which fits the business usage of many of the frugal physicians on this site, including WCI) will often yield better lifetime savings by electing the mileage deduction. I don’t often see doctors buying heavy, gas-guzzling vehicles for high mileage business use, but I will admit it happens.
My point is that a good CPA will advise on the appropriateness of the vehicle choice and compare the results of each method, both in the current year and as projected into the future. There is a good reason that the IRS allows taxpayers to change from the mileage method to actual use, but not vice versa. It is because mileage can actually yield a higher deduction for vehicles used many years for business, long after the vehicle is fully depreciated.
Plus mileage is just so much easier to keep track of.
Post 2018, un-reimbursed employee expenses like mileage have gone away? N’est-pas? Mileage is no longer deductable?!?!?
Post 2017, unreimbursed employee business expenses are no longer deductible. The business can continue to use an “accountable plan” to reimburse the expenses, tax-free to the employee.
Mileage continues to be deductible for business owners.
No, it still is.
I have a dedicated business vehicle, and a separate personal vehicle. Do I still need to keep track of mileage every day?
Self employed here with a true home office (meet clients at home location).
If your business vehicle is specific to the job (i.e. delivery truck), you do not need to keep track of mileage. Otherwise, I recommend you still do.
btw, whether you are claiming actual expenses or mileage, you still are required to track your mileage. We typically recommend clients download the app MileIQ or something similar.
I’m moving to North Carolina later this year. The hospital where I do my independent contractor coverage will still be in Michigan. They just increased my fees by 10% to make sure that I could still work for them, and they also cover my malpractice.
So, I drive up to Michigan (700 miles) and then commute from a hotel daily.
Is the 700 miles each way business mileage and the daily commute is not?
It makes a big difference. I’ll be going up four or times a year to cover two vacations and two long holiday weekends (F/S/S/M).
That is 1400 X 4 or 5600 business miles with the daily commute not counted?
And yes, the pay is worth it. A vacation cover (weekend, business week, weekend) pays the equal of a full time months wages. This little bit of labor and driving intensive work covers 5 of 6 dollars of my retirement expenses (before taxes). I’ll only need to draw down my retirement accounts by 1 of 6 dollars needed.
You know there are airports in NC and MI, right? 🙂
But yes, I think you’re right that the drive up and back is a business expense at 58.5 cents a mile.
Just looking for clarification.
I currently moonlight and am in residency. My commute from home to my moonlghting sites (1099) are deductible? Or do I have drive from hospital (residency site) to moonlight sites to make it count? Thank you in advance!
How about this scenario… A dentist who has a home office (and takes the home-office deduction) drives into the office to see patients. Business and Admin work is typically done from home office and patients are seen at the office. Would deducting those miles hold up in an audit? ?
If he works (and documents the work) he does before and after going to the office every day then I think it would hold up. But you don’t ever really know until the audit happens.