June 16, 2022

IRS Announces Mid-Year Optional Vehicle Mileage Rate Increase

Article Highlights:

Mid-year Increase
Items Included in the Optional Mileage Rate
What Can Be Deducted in Addition to the Optional Mileage Rate
Switching Methods

With gas prices soaring it has been expected the IRS would increase the mileage rate that business owners can deduct for vehicle use instead of keeping a record of actual expenses. Sure enough, the IRS recently announced a 4-cent increase in the optional mileage rate for the last half of 2022.

The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the last 6 months of 2022, also up 4 cents from the rate effective at the start of 2022. These new rates become effective July 1, 2022.

Optional Mileage Rate for 2022
Purpose	1/1 through 6/30/22	7/1 through 12/31/22
Business	58.5¢	62.5¢
Medical/Moving	18¢	22¢
Charitable	14¢	14¢

The standard mileage rate for businesses is based on a study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. The rate for using an automobile while performing services for a charitable organization is statutorily set and has been 14 cents for over 20 years.

The standard mileage rate is determined annually by the IRS using data from a study conducted by an independent contractor of vehicle-operating expenses based on the prior year’s costs. The rate includes:

Gas,
Oil,
Lubrication,
Maintenance and Repairs,
Vehicle registration fees,
Insurance, and
Straight-line depreciation.

Not included in the standard rate, and deductible in addition to the optional rate, are:

Parking,
Tolls, and
State and local property taxes attributable to business use.

Sales tax paid when the vehicle is purchased must be capitalized into the business basis of the vehicle, so it isn’t separately deductible.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates, which may produce a better result considering the skyrocketing fuel prices. Taxpayers can also switch from using the optional mileage rate in one year to actual expenses using straight line depreciation in the next year.

Please give this office a call if you have questions about the new rates or related to switching methods or which method you should use when putting a vehicle into service.

Share this article...

Facebook

Twitter WhatsApp LinkedIn Pinterest Pocket Reddit Email

Want tax & accounting tips and insights?

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

Our Team

At IAM Accounting LLC, we take pride in our diverse and experienced team of professionals, each dedicated to providing exceptional service in accounting, tax planning, payroll, and financial management. Our team members bring a wealth of knowledge from various financial backgrounds, working together to ensure that every client receives the personalized attention and expertise they deserve. From managing complex accounting operations to providing tax-saving strategies, we’re here to help you achieve your financial goals with precision and care.