IRS Increases Mileage Deduction Rate
On June 9, 2022, the IRS implemented a mid-cycle increase to the mileage deduction rate for vehicles used for business purposes. The increase to 62.5 cents per mile, up from the prior rate of 58.5 cents per mile, will take effect July 1 and remain for the rest of 2022.
The IRS also announced a 4-cent per mile increase for vehicles driven for medical or moving purposes, which will rise to 22 cents per mile.
“The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices,” IRS Commissioner Chuck Rettig said in a statement. “We are aware 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.” Rates are generally updated annually; the last mid-cycle adjustment was in 2011.
In order to take the standard mileage deduction in your business, you must own or lease your car and:
• You must not operate five or more cars at the same time, as in a fleet operation,
• You must not have claimed a depreciation deduction for the car using any method other than straight-line,
• You must not have claimed a Section 179 deduction on the car,
• You must not have claimed the special depreciation allowance on the car, and
• You must not have claimed actual expenses after 1997 for a car you lease.
As an alternative to the standard mileage deduction, a business is allowed to use the actual expense method, using the actual expenses incurred in the operation of the vehicle for business use. This includes gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation that are attributable to the portion of the total miles driven during the tax year that are actual business miles.
If you have any questions on this or any other topics, please reach out to a Stanfield + O’Dell tax professional.