The Internal Revenue Service will raise the optional standard mileage rate for the final six months of 2022 to help offset the rise in gas prices nationwide.
The new rates to calculate the deductible costs of operating an automobile for business and certain other purposes become effective July 1, 2022, and will remain in place through January 1, 2023. Those revised rates are:
- Business: 62.5 cents per mile, up from 58.5 cents
- Medical/Moving: 22 cents per mile, up from 18 cents
Taxpayers should use the following rates for any miles traveled between January 1, 2022, and June 30, 2022:
- Business: 58.5 cents per mile
- Medical/Moving: 18 cents per mile
The 14 cents per mile rate for charitable organizations remains unchanged as it is set by statute.
The IRS, which last made such an increase in 2011, noted it considered depreciation, insurance, and other fixed and variable costs in addition to the rising gas prices when raising the rates mid-year.
Businesses can use the standard mileage rate to calculate the deductible costs of operating qualified automobiles for business, charitable, medical, or moving purposes.
Important reminders and considerations
When reimbursing employees for miles driven, keep in mind the following reminders and considerations:
- The Tax Cuts and Jobs Act (TCJA) does not allow employees to write 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 have the option to 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.
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.