New Mileage Rate Goes into Effect

New Mileage Rate Goes into Effect

With the increase in fuel prices, the Internal Revenue Service (IRS) announced an increase in the optional standard mileage rate. New rates went into effect on July 1, 2022, marking the third time since 2008 that the IRS has made a mid-year increase in the standard mileage rate. The IRS provided legal guidance on the new rates in Announcement 2022-13.

As of July 1, 2022, the standard mileage rates for the use of a car (including vans, pickups, or panel trucks) are as follows:

  • 62.5 cents (up 4 cents from the rate for January – June 2022)
  • 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces (up 4 cents from the rate for January – June 2022)
  • 14 cents per mile driven in service of charitable organizations. The rate is set by statute and remains unchanged

“The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices," said IRS Commissioner Chuck Rettig. “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.”

Mileage Rate Change

New Mileage Rates Chart

What is The Optional Standard Mileage Rate?

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use instead of tracking actual expenses. It is based on the fixed and variable costs of operating a car, such as fuel, depreciation, and insurance. The federal government and businesses also use the rate as a benchmark to reimburse their employees for mileage.

Taxpayers always have the option of calculating the actual costs of using their vehicle instead of using the standard mileage rates. Taxpayers should use the rates outlined in Notice 2022-03 for travel from January 1 - June 30, 2022. 


The Back Story of The Operational Standard Mileage Rate Increase

This year’s increase also comes after IRS Commissioner Charles Rettig received two letters from congress requesting an increase because of the sharp rise in fuel prices this year. The first letter was dated March 25 and asked Rettig to provide a midyear increase. On May 13, another letter to Rettig cited the increases in gasoline prices since the beginning of 2022, suggesting that a retroactive increase back to March 1, 2022, would be justified. Neither congressional letter recommended a percentage increase, but they compared current gasoline prices to those in December 2021, when the IRS issued the 2022 rate in Notice 2022-03.

According to the U. S. Energy and Information Administration, at the end of 2021, the nationwide retail average price of gasoline was $3.40 per gallon. According to that same data, in June 2022, the average cost per gallon was $5.03, an increase of $1.63, a rise of 47.9%. When the IRS increased the standard mileage rates in 2011, fuel prices averaged $3.75 per gallon. Before the 2008 rate adjustment, the average fuel cost was $4.11. 

New Mileage Rate Goes into Effecthttps://www.cbiz.com/Portals/0/Images/HCM_gas_pump-1.png?ver=isjzgjjHT1lz29ylAXrwjA%3d%3dhttps://www.cbiz.com/Portals/0/Images/HCM_gas_pump-2.png?ver=PGqpUxgWT7RbpS8LynsjkQ%3d%3dWith the increase in fuel prices, the Internal Revenue Service (IRS) announced an increase in the optional standard mileage rate. New rates went into effect on July 1, 2022, marking the third time since 2008 that the IRS has made a mid-year increase in the standard mileage rate. 2022-07-05T16:00:00-05:00With the increase in fuel prices, the Internal Revenue Service (IRS) announced an increase in the optional standard mileage rate. New rates went into effect on July 1, 2022, marking the third time since 2008 that the IRS has made a mid-year increase in the standard mileage rate. NonePayroll ServicesYes