The IRS recently announced that the optional standard mileage rate is increasing by 4 cents per mile for the last six months of 2022. Effective July 1, the standard mileage rate for business travel will be 62.5 cents per mile.
The rate for deductible medical or moving expenses (which is available only for active-duty members of the military) is also increasing by 4 cents per mile and will be 22 cents for the second half of 2022.
The adjustment is a result of recent increases in the cost of gasoline. Normally, the adjustment is made annually, but IRS Commissioner Charles Rettig said the Service was taking this “special step” “to better reflect the recent increases in fuel prices.”
The business standard mileage rate is used by taxpayers to determine the deductible costs of operating an automobile instead of tracking actual costs. The mileage rate is also used by many businesses to reimburse their employees for mileage.
So what does this mean for me?
If you are a self-employed individual, you’ll want to not only continue to track your mileage during 2022, but also keep track of when the mileage occurred. If the mileage occurred from January 1st through June 30th, you may be able to take a 58.5 cents per mile deduction. Whereas, if the mileage happened after June 30th, your deduction may now be 62.5 cents per mile. Tracking this throughout the year will make it easier to give the breakdown between the two rates come tax time.
If you are an employer who regularly reimburses employees for miles driven, consider updating your company’s mileage reimbursement rate. With the cost of gas increasing, your employees will certainly appreciate an increased mileage reimbursement rate.
If you have questions about the rate change or the documentation required for deducting the business use of your vehicle, please call Cray Kaiser at (630) 953-4900.