Likely, you've taken note of the recent country-wide spike in gas prices. Well, the IRS has too! As of July 1, 2022, small businesses that qualify and use the standard mileage rate can now deduct 62.5 cents per business mile. That's up four cents per mile! This increase will last through December 31, 2022.

What If You Use The Three-Month Sample Method of Tracking?

This brings up a practical question- what do you do if you track business mileage using the three-month sample method? As a reminder, here are the basics of how the IRS describes the three-month test:

• The taxpayer uses their vehicle for business use.
• They, as well as members of their family, use the vehicle for personal use.
• The taxpayer keeps a mileage log for the first three months of the taxable year, showing that they use the vehicle 75 percent of the time for business.
• Invoices and paid bills show that the vehicle use is about the same throughout the year.

According to this IRS regulation, the three-month sample is adequate for this taxpayer to prove 75 percent business use.

Sample-Method Solution

To use the sample rate, you need to prove that your vehicle use is about the same throughout the year. Your invoices and paid bills prove the mileage part, and your appointment book can add creditability to consistent business and personal use.

Keep in mind that the sample is just that—a sample—it’s pretty exact for the three months but not that exact for the year, although it must adequately reflect the business mileage for the year.

If you have a good three-month sample, you take your business mileage for the year and apply the 58.5 cents to half (January 1-June 30, 2022) the mileage and the 62.5 cents to the remaining half (July1-December 31, 2022) to find your deductions. 

For example, say you drove 20,000 business miles for the year. Your deduction would be $12,100 (10,000 x 58.5 cents + 10,000 x 62.5 cents).

Mileage Record for the Full Year

If you have a mileage record for the entire year, no problem. Your record gives you the mileage for the first six months and the last six months.

Would you like more information on deducting your businesses' mileage? Click here to schedule an appointment with one of Gold Standard's seasoned tax accountants.

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