By Keiter CPAs
Rising gas prices result in standard mileage rate increase for business travel
The IRS recently issued Announcement 2022-13 increasing the standard mileage rates for the business use of an automobile and for medical transportation, and moving.
Overview of new IRS standard mileage rates
As a result of soaring gas prices and requests from the private sector to provide relief for taxpayers and businesses, the IRS is adjusting the standard mileage rate (Notice 2022-3) to better reflect current gas prices. According to American Automobile Association (AAA), the average price of regular gasoline on June 13, 2022, was $5.01 per gallon – an increase from $3.06 per gallon one year ago.
Beginning July 1, 2022, the standard mileage rates for use of a car, van, pickup or panel truck will be as follows:
- 62.5 cents per mile
- Up 4 cents from the rate for the first half of 2022 of 58.5 cents per mile
Medical or Moving Purposes
- 22 cents per mile
- Up 4 cents from the rate for the first half of 2022 of 18 cents per mile
As a result of this new announcement taxpayers will use two sets of rates to compute the business mileage deduction for 2022.
Note: The mileage rate for charitable organizations will remain at 14 cents per mile because it is set by statute. It should also be noted that for Virginia taxpayers, the standard mileage rate for charitable purpose is 18 cents per mile.
For business purposes, taxpayers have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rate. If a taxpayer wants to use the business standard mileage rate, the taxpayer must opt to use it in the first year that the vehicle is placed in service. However, in later years, a taxpayer can use the standard mileage rate or actual expenses, whichever produces the highest deduction. Taxpayers that choose the standard mileage rate for a leased vehicle must use that method for the entire period of the lease.
Mileage Deduction Considerations
In our experience, the standard business mileage rate is very close to the actual costs of operating a vehicle, ignoring the impact the of bonus depreciation deduction. As a result, taxpayers will probably choose the actual expense method in the first year the vehicle is placed in service in order to take advantage of the bonus depreciation deduction.
It should be noted that under the Tax Cuts and Jobs Act of 2017, taxpayers cannot take a miscellaneous itemized deduction for unreimbursed business use of an automobile. However, sole proprietors that file a Schedule C may claim the automobile deduction on their Schedule C.
Employers can also use these rates to reimburse their employees for the business use of their automobile and to calculate the taxable portion of auto allowances given to employees.
About the Author
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.