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With gas at the pump on the rise, the IRS issued legal guidance (Announcement 2022-13) on the new mid-year rates for the optional standard mileage rate. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.

Effective July 1, 2022, the standard mileage rate for business travel will be 62.5 cents per mile, an increase of 4 cents. Additionally, the new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents also up by 4 cents from the rate effective at the start of 2022. Typically, the IRS makes annual adjustments to these rates but given the current economy and the pain at the pump, they made this mid-year rate change. The last time the IRS made a mid-year increase was in 2011 after gas prices soared.

The Standard Mileage Rate

The standard mileage rate can used by taxpayers to calculate the amount of deduction when traveling by vehicle for business purposes. Taxpayers have the option to deduct the actual expenses attributable to your business use, including gas, oil, tires, insurance, repairs, and licenses and vehicle registration fees. In addition, you may claim a depreciation allowance for the vehicle, based on the percentage of business use.

To make things simpler, taxpayers instead can use this IRS-approved standard mileage rate. With the standard mileage deduction, you must record the mileage for each business trip, the date, the destinations, the names and relationships of the business parties and the business purpose of the travel but you don’t have to account for all your actual expenses.

Other Changes

Besides increase for business driving, the IRS issued a new rate for deductible medical expenses for all taxpayers or moving expenses (available only for active-duty members of the military under current law). This rate, as of July 1, 2022, is 22 cents. This is an increase of 4 cents from the rate effective at the start of 2022 (18 cents per mile).

Non-Qualifying Situations

It is important to note when the standard mileage rate deduction should NOT be used. In these situations, taxpayers cannot use the IRS standard mileage rate:

  • Operate cars for hire (such as taxis and limos),
  • Use five or more cars at a time (such as fleet operations),
  • Have claimed an accelerated depreciation deduction for the vehicle in the past,
  • Have taken a Section 179 deduction for the vehicle in the past,
  • Have claimed actual expenses after 1997 for a vehicle that’s leased, or
  • Are a rural mail carrier who has received a qualified reimbursement.

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If you have questions about the information outlined above, do not hesitate to contact us. For additional information call us at 630.954.1400 or click here to contact us.