12 Jul Rare Mid-Year IRS Mileage Rate Change
The IRS has increased the standard business mileage rate–used to deduct eligible business trips in a vehicle on tax returns–for the second half of 2022. The mid-year move is rare. Since 2000, the IRS has adjusted the rates in the middle of the year just twice before, in 2008 and 2011. The IRS typically updates the business mileage rate yearly, effective January 1.
However, the sizable jump in fuel prices in 2022 has led the IRS to make the mid-year increase. While gasoline prices have eased the last few weeks, they remain nearly 50 percent higher than a year ago.
The new business deduction rate is $0.625 per mile (62.5 cents), a four-cent increase over the 2022 rate effective in January. That $0.585 per mile was a two-and-a-half-cent increase over 2021. It is effective from July 1 through the end of 2022. The new rate is not the largest increase at one time. That was the mid-year jump in 2011 of 4.5 cents from $0.51 to $0.555. And the mileage rate sometimes has decreased. For example, it dropped in 2016 and 2017.
IRS Commissioner Chuck Rettig says, “The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices. We are aware [that] a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate.”
Businesses may reimburse employees for business miles at whatever rate they wish, whether equal to, less than or more than the IRS-set rate. However, a company must report any reimbursement more than the IRS rate as income to the employee. In polls, most organizations reimburse at the IRS rate, while a few reimburse under the IRS cap.
The Energy Information Administration forecasts an 11.8 percent decrease in the average price of gasoline next year, from $4.05 to $3.57. That might mean a lowering of the mileage rate again.
But for now, businesses that use the optional business mileage rate deduction for travel get a bit of a break in the face of the significant rise in the cost of fuel. The IRS also adjusted the rate for medical and (military) moving expenses by two cents. However, the mileage rate for charitable driving remains unchanged at $0.14.
