Tax Alert: Mid-Year Increase to IRS Mileage Rates

IRS mileage rates generally are established annually and are left in place for each calendar year once set. However, the spiraling cost of gasoline nationwide has led the IRS to do what they have not done in more than a decade – increase the mileage rates mid-year.

Effective for miles incurred beginning July 1, 2022, the standard mileage rate increases from 58.5¢ to 62.5¢ per mile. This rate is used for reimbursement of employee travel costs by many businesses, and is also the rate allowed as a deduction by taxpayers filing tax returns who have elected the use of the mileage rate rather than tracking actual costs incurred while operating a vehicle for business use.

Similarly, the IRS adjusted the rate applicable to miles driven for medical purposes or for moving/relocation from 16¢ to 22¢ per mile, also effective for miles driven beginning July 1. This rate is less commonly encountered than the standard mileage rate because a larger percentage of such deductions generally are claimed as miscellaneous itemized deductions, and that category of deductions has been placed in “time out” by Congress, temporarily suspended through 2025. However, under the right circumstances, it may be of current use to members of the military, performing artists, or government officials.

Interestingly, the mileage rate applicable to miles driven for charitable purposes remains unchanged at 14¢.

Observation: IRS Commissioner Chuck Rettig explained the increase by noting the IRS effort to “better reflect the recent increases in fuel prices.” The new standard mileage rate amounts to an increase of just under 7%. While this is roughly in line with overall inflation rates, fuel costs specifically have risen by several times that percentage in just half a year, leaving one to speculate that more adjustments are, or should be, forthcoming. Also, with this unusual mid-year change, those tracking mileage will need to do so in a manner that separates the miles into those incurred both before and after the rate increase.

More detailed explanation of the changes described above may be found in IRS Announcement 2022-13.

For more information regarding historical use of the standard mileage rate, including contrast with the actual expense method of deductions, please refer to the following previously-published BNN articles:

For more information, please contact Stan Rose or your BNN tax advisor at 800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice, nor is it intended to convey a thorough treatment of the subject matter.

Keep reading