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:
- 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
- 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.
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