IRS Makes Rare Mid-Year Mileage Rate Adjustment

Thursday, June 23, 2022 – The IRS has announced an increase in the optional standard mileage rate. Effective July 1, 2022, the standard mileage rate for business travel will be 62.5 cents per mile — up 4 cents from the rate effective at the start of the year.

Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes. The new rate for deductible medical or moving expenses (available only for active-duty members of the military) will be 22 cents for the remainder of 2022 — up 4 cents from the rate set at the start of 2022. The 14 cents per mile for charitable organizations remains unchanged, as it is set by statute.

The IRS normally updates the mileage rates once a year (in the fall for the next calendar year). Mid-year increases in the optional mileage rates are rare; the last time the IRS made such an increase was in 2011. This special adjustment for the final months of 2022 is in recognition of recent gasoline price increases. While fuel costs are a significant factor in the mileage figure, other items enter into the calculation of mileage rates (such as depreciation, insurance, and other fixed and variable costs).

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Taxpayers continue to have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates, although this does require extensive record-keeping.

The IRS provided legal guidance on the new rates in Announcement 2022-13.