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Davis & Graves, CPA, LLP works diligently to keep our clients informed of the most current, relevant and signifcant changes in the tax laws.  The links below allow you access to our latest newsletter and additional items of tax concern. 

 

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June 30, 2022

IRS Makes Rare Midyear Mileage Rate Adjustment

 

The IRS has announced an increase in the optional standard mileage rate for the final 6 months of 2022. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.

For the final half of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available only for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. These new rates are in effect from July 1, 2022.

The 14 cents per mile rate for charitable organizations remains unchanged, as it is set by statute.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2022. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

Prices drive change

"The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices," said IRS Commissioner Chuck Rettig. "We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate."

While fuel costs are a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs, according to the IRS.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Taxpayers continue to have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates, although this does require extensive recordkeeping.

Midyear increases in the optional mileage rates are rare; the last time the IRS made such an increase was in 2011.

Further details are available in Notice 2022-03.