Your service business relies on keeping your trucks on the road, and every single day you and your employees are putting miles on those trucks, on top of that you’ve got gas, wear and tear, tires, and repairs. All of which could be the biggest tax write off at the end of the year. But did you know that you could be short-changing yourself? Standard mileage rates change each year and you aren’t accounting for those changes you could be missing out on some pretty big tax savings. Let’s break down the standard mileage rates for 2022 and what you need to know to get the biggest tax write off you can for your work vehicles.
Standard Mileage Rates for 2022
This information is for you if you only have a couple of work vehicles. Starting January 1, 2022, the standard mileage rates for the use of a car, van, pickup, or panel truck are as follows:
- 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021
- 18 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, up 2 cents from the rate for 2021, and
- 14 cents per mile driven in service of charitable organizations. The charitable rate is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil, but business owners also have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates. For leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen. In order to take advantage of these numbers, you first need to be tracking your mileage! For years, business owners used to track this with pen and paper but technology has developed since then. There are a number of apps you can download now that make tracking your mileage easy. As a business owner, it’s also a good idea to put specific requirements in place for your employees’ mileage logs. It doesn’t have to be fancy. You can use an Excel mileage log template to distribute to your staff so they’re aware of what’s expected from their reports if they track mileage manually.
Remember, it’s important to distinguish between personal trips and business trips, and to track everything accurately. As much as it might feel like it should, commuting to and from work still doesn’t count as tax-deductible mileage!
If you have a fleet of trucks, typically they are purchased. In this instance, you will depreciate them while also recording actual costs like repairs, gas, insurance, oil changes, tires, and so forth. The idea behind vehicle depreciation for taxes is to spread the cost of a vehicle) car out over its “useful life,” instead of writing off its whole cost the year you buy it. Useful life describes the amount of time it takes for your vehicle to lose 100% of its original value. For tax purposes, the IRS generally considers five years to be standard for most vehicles. How much the vehicle is used for business (and its gross vehicle weight GVW) will also affect the amount it depreciates and the deduction taken.
If you want some help implementing these tax-saving and mileage accounting systems in your business and make sure that you claim the maximum deduction in 2022, feel free to reach out to us! We’ll connect you with one of our Profit First certified professionals who will help you set up the systems you need to get the maximum amount of taxes possible.