The IRS recently released the 2023 mileage rates for businesses to use as guidance when reimbursing workers for applicable miles driven within the year. The rates tend to increase yearly to account for rising fuel and vehicle and maintenance costs and insurance rate increases.
Businesses can use the standard mileage rate to calculate the deductible costs of operating qualified automobiles for business, charitable, medical, or moving purposes. Keep reading for the updated mileage rates and some reminders for mileage reimbursements and deductions.
Standard mileage rates for cars, vans, and pickups or panel trucks are as follows:
|Use Category||Mileage rate
(as of Jan. 1, 2023)
|Change from the previous year|
|Business miles driven||$0.655 per mile||$0.03 increase from mid-year 2022|
|Medical or moving miles driven*||$0.22 per mile||$0.00 increase from mid-year 2022|
|Miles driven for charitable organizations||$0.14 per mile||Note: Only congress may adjust the mileage rate for service to a charitable organization by a Congress-passed statute.|
*Moving miles reimbursement for qualified active-duty members of the Armed Forces
Important Reminders and Considerations
When reimbursing employees for miles driven, keep the following in mind:
- The Tax Cuts and Jobs Act (TCJA) prohibits employees from writing off unreimbursed business mileage. Companies that fail to make up for this reimbursement could face legal consequences.
- Taxpayers using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or claiming a Section 179 deduction may not also use the business standard mileage rate for the same vehicle.
- Taxpayers can calculate the actual costs of using their vehicle rather than accepting the standard mileage rates. Actual expense methods often provide different results than standard mileage. Talk with your CPA to determine the best method for you.
- While the IRS standard mileage rate helps hold businesses accountable, it does not account for fluctuations in vehicle-related expenses in different regions of the country.
- The Fixed and Variable Rate (FAVR) allowance is an alternate method for businesses whose employees use their vehicles for work. This method can help businesses avoid over-or underpaying employees for using their vehicles for business purposes.
- Mileage reimbursement rates apply to gasoline, diesel-powered, electric, and hybrid-electric vehicles.
To review your organization’s mileage reimbursement policy and any alternate methods for calculating appropriate reimbursement amounts, reach out to our team of knowledgeable professionals today.
Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the Internal Revenue Code, or for promoting, marketing, or recommending any transaction or matter addressed herein.