The IRS is trying to ease the pain at the gas pump. Standard mileage rates for the business use of employees’ vehicles will go up 4 cents per mile, to 62.5 cents per mile, effective July 1 through Dec. 31, 2022.
The rate is used to compute the deductible costs of operating an automobile for business use, as an alternative to tracking actual costs. Beyond the individual tax deduction, employers often use the standard mileage rate -- also called the safe harbor rate -- to pay tax-free reimbursements to employees who use their own vehicles to conduct business.
Employers have the option of calculating the actual costs of employees using their vehicles rather than using the standard mileage rates.
Midyear increases in the optional mileage rates are pretty rare. (The last time was in 2011.) The IRS typically updates the mileage rates once a year in the fall for the next calendar year. From Jan. 1 through June 30, 2022, the rate was set at 58.5 cents per mile.
While the IRS cited surging fuel costs as a significant factor in the decision, other factors enter into the calculation of mileage rates as well, such as depreciation and insurance. For vehicles employees use for business, the IRS set the portion of the mileage rate treated as depreciation at 26 cents per mile for 2022.
Gas prices have been steadily rising in 2022, and on June 9, the average cost of a gallon of gasoline nationwide surpassed $5 for the first time. A year ago, the average price was $3.15 a gallon, according to the U.S. Energy Information Association.
Here are the rate changes through the end of 2022:
- For business use: 62.5 cents per mile, up from 58.5 cents
- For medical care and moving active-duty military members: 22 cents per mile, up from 18 cents
- In service of charitable organizations: 14 cents per mile (unchanged)
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