Due to the recent surge in gasoline prices, the Internal Revenue Service (IRS) has revised the optional standard mileage rate, increasing it by 4 cents for the remainder of 2022. Effective July 1st, 2022, this modification specifies the amount taxpayers may use to compute the deductible transportation expenses for business travel, charitable, medical, and moving mileage purposes. This revision also specifies the amount that taxpayers must utilize while computing the reduction in depreciable basis that will be taken under the new standard mileage rate along with the maximum standard automobile cost allowed under a fixed and variable rate (FAVR) plan.

Background:

The optional standard mileage rates are provided to taxpayers for computing the deductible costs of using an automobile for business, medical, charitable, or moving expense purposes instead of having to track actual costs. Such rates provide a much simpler solution to calculating the business use of an auto, instead of requiring the taxpayer to track and save receipts for transportation expenditures. These rates are also used as a benchmark to reimburse employees who utilize their own personal vehicles and incur transportation costs while conducting business for their employers. The standard mileage rates take into account various factors such as fuel costs, insurance and depreciation costs, along with other variable and fixed costs.

New Standard Mileage Rates:

Information retrieved from IRS.gov (https://www.irs.gov/newsroom/irs-increases-mileage-rate-for-remainder-of-2022)

1. The business standard mileage rate for transportation expenses will be 62.5 cents per mile driven. Under § 11045 of Public Law 115-97, 131. Stat. 2054 (December 22, 2017), taxpayers are not allowed to use the new standard mileage rate to claim a miscellaneous itemized deduction such as employee transportation or travel expenses that have not been reimbursed in the years beginning after 2017 and before 2026. This indicates that employees who use their own vehicles for work cannot claim employee business expense deductions as part of miscellaneous itemized deductions during the suspension period.
2. The standard mileage rate for use of an automobile for the purpose of medical care is 22 cents per mile. Under § 11049 of the Tax Cuts and Jobs Act (TCJA), the tax deduction for moving expenses for the years beginning after 2017 and before 2026 is suspended, except for active-duty military personnel who incur moving expenses in accordance with military order and a permanent change of station. Therefore, the new moving standard mileage rates currently only apply to active-duty military members for the remainder of 2022.
3. The standard mileage rate of 14 cents per mile for charitable contributions is fixed under I.R.C. § 170(i), therefore, it remains unmodified for the final six months of 2022.

Reductions to Depreciable Basis:

While using a vehicle for business transportation or travel purposes, the portion of the standard mileage rate that is treated as depreciation is 26 cents per mile for the remainder of 2022. This amount has remained unchanged since 2021.

Allowable Automobile Cost:

Under this new revision, the standard automobile cost shall not surpass the maximum amount of $56,100 for automobiles including vans and trucks for the purposes of calculating the permitted amount under a fixed and variable rate (FAVR) plan. The fixed and variable rate allowance is set into place to help reimburse employees who utilize personal vehicles for work purposes.

Contact the professionals at Gilliam Bell Moser for additional information on IRS standard mileage rates.

Brett Davidson, CPA/PFS