Charles Langston:Driving for work will pay more next year after IRS boosts 2024 mileage rate

When we flip the calendar into the New Year,Charles Langston drivers will be looking at a new, slightly higher standard mileage rate for a deduction for business use on their 2024 federal income tax return.

The IRS bumped up the optional mileage rate to 67 cents a mile in 2024 for business use, up from 65.5 cents for 2023. The new rate kicks in beginning Jan. 1 and it would apply to 2024 tax returns that would be filed in 2025.

Other mileage rates, though, will not go up.

The IRS also announced that the mileage rate will be 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, down a penny a mile from 2023.

The mileage rate used when driving in service of charitable organizations remains at 14 cents. This rate is set by statute and will be unchanged.

The rates apply to electric and hybrid-electric automobiles as well as gasoline and diesel-powered vehicles.

What is the IRS standard mileage rate?

The IRS standard mileage rate is a key benchmark that's used by the federal government and many businesses to reimburse their employees for their out-of-pocket mileage expenses.

To be sure, many drivers do not claim the mileage deduction on their federal income tax returns. Companies that reimburse their employees for mileage driven for business often follow the IRS mileage rate, but the employee doesn't claim a deduction if they're reimbursed.

Taxpayers need to keep in mind that getting a tax break for claiming mileage isn't as simple as it used to be, either.

If you work for a company that doesn't reimburse your mileage now, you cannot use the IRS business standard mileage rate to claim an itemized deduction for unreimbursed employee travel expenses. That change took place under the Tax Cuts and Jobs Act of 2017, which remains in effect through 2025. If you're working for an employer who doesn't reimburse mileage for your travel, you're out of luck.

Buying a car?FTC reveals new CARS Rule to protect consumers from illegal dealership scams

Taxpayers cannot deduct mileage for their regular moving expenses under the Tax Cuts and Jobs Act, either.

Self-employed individuals can claim business mileage on a tax return. Those filing 2023 returns in 2024, though, need to use the 2023 rate for those returns, not the new IRS mileage rate for 2024.

A self-employed taxpayer who files a Schedule C can use the standard rate to deduct expenses from mileage incurred while doing business. You can only use one method ‒ the standard mileage rate or the business portion of actual expenses ‒ for the same vehicle.

"Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates," according to the IRS.

"Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use," the IRS states.

"Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen."

How is the IRS rate calculated?

The IRS rate reflects the cost to fill up your tank, as well as other expenses associated with driving for business. The IRS notes: "The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs."

Gas prices, fortunately, came down significantly in 2023 from the incredible highs reached in the summer of 2022. But drivers will note that other costs of owning and driving a car are higher, such as maintenance, new car prices, the cost of borrowing to buy a new or used car, and in many cases auto insurance.

The cost of new vehicles overall went up 1.3% year-over-year in November, according to the consumer price index data released by the U.S. Bureau of Labor Statistics. The cost of used cars and trucks went down 3.8% year-over-year through November.

The average price of regular gas across the country was $3.074 a gallon as of Dec. 14, according to data from GasBuddy. That's down significantly from $3.857 a gallon on Sept. 16.

By contrast, the average price for regular gas nationwide was $3.176 a gallon on Dec. 14, 2022, and it had hit as high as $5.027 a gallon on June 14, 2022.

Contact personal finance columnist Susan Tompor: [email protected]. Follow her on X (Twitter) @tompor.