Florida’s Mileage Rate for 2023 Explained

The Florida mileage rates for 2023 are the same as the IRS mileage rates, which were set in December of 2022. There have been some changes to these rates and the rules regarding mileage deductions that small business owners will need to know. With the right information, you can claim the full amount for which you are eligible and avoid taxes for over-reimbursing employees.

IRS Mileage Rates for 2023

For eligible travel from the 1st of January, 2023, the standard mileage rates are:

• 65.5 cents per mile driven for business-related travel (an increase of 3 cents from the midyear increase setting the rate for the second half of 2022)

• 22 cents per mile for medical and moving purposes for qualified active-duty members of the Armed Forces who are moving due to a permanent change of station

• 14 cents per mile when volunteering for charitable organizations

How the IRS Mileage Rates Are Determined

The U.S./Florida mileage rate for 2023 is calculated by taking a nationwide average of current variable expenses like gas, oil, and vehicle repairs, plus fixed costs including automobile insurance costs, registration fees, and depreciation.

The increase in the business-related travel mileage rate for 2023 is due to rising fuel prices and increases in insurance premiums in many parts of the country. The charitable organization rate remains unchanged because the price was set by Congress in 26 USC 170(i).

Who Can Claim a Tax Deduction?

The rules as far as who can claimtax deductions for business travel expenses changed for tax years 2018 to 2025. During this period, the following taxpayers can claim a deduction:

• Sole proprietorships / single-member LLCs who use their vehicle for business purposes (use Form 1040, Schedule C)

• A member of a partnership who uses their vehicle for business purposes (use Form 1065, Schedule K-1)

• C corporations (use Form 1120)

• S corporations (use Form 1120S)

Before 2017, employees could claim travel miles driven for work as a miscellaneous itemized deduction. However, since the Tax Cuts and Jobs Act was enacted, unreimbursed employee travel expenses are not deductible. Furthermore, employers in the state of Florida are not required to reimburse employees for work-related travel. However, most do so as an act of good faith.

Calculating Your Deduction

There are two methods for claiming a deduction for travel expenses:

• The standard mileage rate

• The actual expenses

Whichever method you choose, an experienced tax professional in Jacksonville, Florida, can help you calculate your maximum possible deduction.

Standard Deduction Method

To take your deduction using thestandard mileage method, you will need to log all miles driven for business purposes during that tax year and multiply it by the standard mileage rate. This is the simplest and quickest method for calculating your deduction and is the best option if your actual expenses were equal to or less than the standard deduction.

Actual Expense Method

To use the actual expense method, add up all of the actual costs of operating your motor vehicle for the tax year, including fixed and variable costs. Then, multiply the total by the percentage of miles driven for business purposes. For example, if your fixed and variable costs for the year were $8,000 and you used your vehicle for business purposes 50% of the time, you would multiply:

8000 x 0.5 = 4000

In this scenario, you could claim $4,000 as your business travel deduction, as long as you have the documentation to support the expenses claimed. Please note that you cannot claim tolls or parking fees as deductions.

Which Calculation Method Is Best?

Data from insure.com, summarized by 24/7 Wall Street, ranked Florida as the fifth most expensive state in the country for car ownership in June 2021, taking into account average car ownership costs, average gas prices, average annual insurance costs, and average fuel expenditure per licensed driver. 

Based on this fact, small business owners in Florida might expect a more favorable tax return from the Internal Revenue Service if they use the actual expense method as opposed to the standard mileage rate, although this will also be influenced by how many miles you drive for business each year and whether your driving is primarily urban or rural.

Calculating Mileage Reimbursement

While the IRS mileage rate is set as a guide for deductions—not reimbursements—many employers plan to use the nationwide mileage rate 2023 to reimburse employees for business-related travel. The two main reasons for this are:

• The standard mileage rate might be cheaper than reimbursing the actual cost.

• Reimbursements set at the standard mileage rate are not taxable for employers or employees.

The fairest way to reimburse employees for business use of a private vehicle is by having them log their business mileage and showing records of their actual expenses. As long as you have the records to justify the reimbursement calculation, you and the employee won't be taxed. 

Employers are only taxed if they overpay an employee for vehicle expenses, in which case the amount overpaid is counted as income. That's why it's important to be aware of federal tax laws and keep detailed records to substantiate each claim.

How a Professional Bookkeeper Can Help

Whether you're preparing your federal income tax return or working out travel reimbursements for employees, professional small business bookkeeping services can streamline the process with detailed day-to-day record-keeping and quarterly and annual reports. 

Remember that any deductions claimed on your return can become the subject of an IRS audit. That's why detailed and accurate record-keeping is so crucial, as is up-to-date tax advice on the deductions you can and can't claim in line with thecurrent tax deduction laws.

Optimize Your Deductions and Reimbursements

Now that you know the Florida mileage rate for 2023 as set by the Internal Revenue Service, take the opportunity to log eligible travel miles to make sure you can claim them on your return. If you're not sure which method of calculation would be more favorable come return time, you can track your expenses and miles for a month and calculate the result each way.

In most cases, consulting with an experienced provider of Florida tax planning services is the best way to optimize your deductions and reimbursements in the Sunshine State. Tax accountants have an in-depth knowledge of state and federal tax laws and do their best to find ways to help you save.