On June 9th, the IRS announced a HUGE change in the standard mileage rate for 2022!!
This change will affect business owners, freelancers, and anyone traveling for business purposes.
In this episode, I will explain everything you must know regarding this change and how it will affect your taxes.
At the start of the year, the standard mileage rate was 58.5 cents a mile for business travel. As of July 1st, the standard mileage rate for business travel will be 62.5 cents per mile.
This is a 4-cent increase from where we started on January 1st, 2022. Therefore you're probably wondering how to keep track of your mileage.
How To Keep Track Of Your Mileage
To keep track of your mileage for the entire year, the first step is to have clean accounting and mileage track records.
I recommend having a mileage log for the first half of the year and a separate mileage log for the second half of the year.
Why The IRS Made This Change
The IRS is basically attempting to do its part to counterpunch the high gas prices and inflation currently occurring in the U.S.
Methods Of Tracking Your Mileage.
One method to keep track of your mileage is to use a spreadsheet that identifies the to and from or start and end points of all business travel.
The second method is to take a picture of your odometer reader before you start each trip and after you finish.
The third method is using an odometer app to track your business travel.
A quick note about the difference between the actual vs. the standard mileage difference.
Actual vs. Standard Mileage
You can't use both the actual expenses and standard mileage.
When you use the Standard Mileage deduction, you also can't deduct individual expenses for your car.
For example, if you need new breaks or a new transmission, you might be better off using the Actual Expense method to take advantage of these large expenses.
The only way to know for sure is to keep good records and calculate your tax savings both ways.
I recommend speaking with your accountant to determine which method works best.