By John T. Murray, CPA, Partner
The IRS recently issued Notice 2022-3 which updated the standard mileage rates for business use of an automobile. The Notice also updated the standard mileage rates for charitable deduction purposes and moving expense purposes.
New Mileage Rates for Business Use of an Automobile
The standard mileage rates for use of a car, van, pickup or panel truck will be as follows:
Business Use
- 58.5 cents per mile
- Up 2.5 cents from the 2021 rate
Medical or Moving Purposes
- 18 cents per mile
- Up 2 cents from the 2021 rate
Charitable Deduction
- 14 cents per mile
- This rate is set by statute and remains the same from the 2021 rate
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.
It should also be noted that for Virginia taxpayers, the standard mileage rate for charitable purpose is 18 cents per mile.
Source: https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2022
About the Author
John T. Murray, CPA, Partner
John is a member of the Firm’s Financial Services and Mergers & Acquisitions and Technology industry teams with over 20 years of experience in both the private and public accounting practice areas. He applies his experience to provide insights and identify opportunities for closely-held businesses in the real estate, healthcare, private equity, and government contracting industries. He provides ongoing budgeting, forecasting, cash management, and compensation planning for many of his clients. John also applies his expertise and knowledge in structuring transactions and reviewing proposed acquisitions in order to minimize the tax consequences for his clients that are located throughout the US as well as internationally.
More Insights from John T. MurrayThe 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.
