The IRS is increasing the 2022 optional standard mileage rates for deducting automobile costs by four cents effective on July 1, 2022. The mileage rates are used to calculate the deductible costs of operating an automobile for business, medical or moving purposes, and if employers use these rates to reimburse employees for business miles, the expense is deemed substantiated.
Announcement 2022-13 provides that effective July 1, 2022, the standard mileage rates for the use of an automobile will be:
- 62.5 cents per mile for business miles driven (up from 58.5 cents earlier this year)
- 22 cents per mile driven for medical or moving purposes (up from 18 cents earlier this year)
- The 14-cent rate per mile driven in service of charitable organizations remains unchanged as it is set by statute
The initial 2022 standard mileage rates set forth in Notice 2022-3 will continue to apply to:
- Deductible transportation expenses paid or incurred for business, medical, or moving expense purposes before July 1, 2022
- Mileage allowances paid to an employee before July 1, 2022, or for transportation expenses paid or incurred by an employee before July 1, 2022.
In lieu of using the optional standard rates, taxpayers have the option of calculating the actual costs of using their vehicle—but only if taxpayers maintain adequate records or other sufficient evidence of the actual costs incurred. Taxpayers using the optional standard mileage rates and other special rules addressed in the notice must comply with Rev. Proc. 2019-46, which made numerous modifications to the rules for using optional standard mileage rates and the substantiation rules for automobile costs in order to reflect the changes made by the Tax Cuts and Jobs Act.
The increase is due to rising gas prices, but is more modest than many lawmakers had pushed for. It is less than the 4.5-cent increase the last time the IRS made a midyear adjustment in 2011. Lawmakers had also pushed the IRS to make any adjustment effective back to March 1, when gas prices began rising sharply. The IRS, however, appears to favor increases at the midway point in the year. The 2011 change was also effective July 1 even though gas prices began rising sharply early in 2011 and peaked in May. Businesses using the standard mileage rate should prepare to identify and separately track expenses and employee allowances paid or incurred before and after July 1, 2022.
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