In order to help combat the high fuel prices, the Internal Revenue Service announced that they will be increasing the optional mileage rate for the final 6 months of 2022. Effective July 1 through December 31, 2022, the new mileage rate for the business use of employees’ vehicles is 62.5 cents per mile. This is up 4 cents from the 58.4 cents per mile rate that went into effect at the beginning of the year. You can review the new rates that recently went into effect under Announcement 2022-13 issued by the IRS. This announcement also provides legal guidance on the new rates.
The rate increase is unexpected as the IRS generally updates the mileage rates once a year in the fall for the next calendar year. The main reason the IRS made a special adjustment was in order to show that they recognize the gasoline price increases. Besides fuel costs, the IRS also uses insurance and depreciation as well as other fixed and variable costs when calculating mileage rates.
Now the optional standard mileage rate is used to compute costs that are deductible by a company for operating a vehicle for business purposes, as an alternative to tracking actual costs. This rate is also used by the federal government and many businesses to reimburse staff members for their mileage. As taxpayers, it is important to note that you always have the option of calculating the true costs of operating a vehicle rather than using the standard mileage rates provided by the IRS.
Midyear increases in the mileage rate are pretty uncommon as the last special change occurred in 2011. As an employer or as a self-employed individual, ensure that you are properly accounting for the rate increase that began effective July 1, 2022.
