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Mileage rate is a term that refers to a monetary rate set by the tax authority for mileage reimbursement or deductions. The rate is meant to be used when calculating reimbursement or deductions for business-related miles/kilometres you drive with a personal vehicle.
See the current mileage rates:
- IRS mileage rate 2023 in the US
- ATO mileage rate 2022/2023 in Australia
- HMRC mileage rate 2023/2024 in the UK
- CRA mileage rate 2023 in Canada
The mileage rate is updated every year by your tax authority and is meant to cover all costs of owning and running your vehicle for the business-use part of your driving.
The costs of owning your vehicle the mileage rate covers:
- Lease payments
- Depreciation
- Road tax
- Insurance
Some of the costs of running your vehicle covered by the mileage rate:
- Fuel
- Oil and tyres
- Repairs and maintenance
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How to use the mileage rate
This will depend on your situation.
As an employee, you will either be reimbursed for mileage from your employer or will be able to claim deductions for your mileage on your annual tax return.
It is common for employers to reimburse employees at the standard mileage rate announced by the tax authority, however, they are not obliged to do so and can use a different mileage rate.
If you receive no company reimbursement for your business mileage, you can claim deductions on your annual tax return. Use the mileage rate of the year you are claiming for and multiply by the distance you’ve driven that same year. This will be your deduction.
If you are self-employed, you might be able to use the standard mileage rate depending on the method of claiming tax deductions for your business-related driving. Generally, you can claim either actual expenses for owning and driving your vehicle for business, or you can use the mileage rate to simplify the records you need to keep each year.
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