Due to current high gas prices, the Internal Revenue Service (IRS) announced June 9 that it would increase the optional standard mileage rate for the final 6 months of 2022 from 58.5 cents per mile to 62.5 cents per mile for business mileage. The rate for deductible medical or moving expenses (active-duty military only) will increase four cents as well from 18 to 22 cents per mile. All new rates will be effective July 1, 2022, through Dec. 31, 2022. The mileage rate for charitable contributions remains fixed at 14 cents per mile by 26 U.S. Code § 170.
The IRS provided legal guidance on the new rates in Announcement 2022-13PDF, issued June 9. The agency normally updates the mileage rates once a year in the fall for the next calendar year, i.e., rates set in the fall of 2021 for all of 2022. With the June 9 announcement, taxpayers should use the original rates for 2022 for travel from Jan. 1 through June 30, 2022 and the June 9 rates for July 1, 2022 through Dec. 31, 2022.
In a statement, IRS Commissioner Chuck Rettig said, “The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices. 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.”
Key Takeaways
- The IRS has raised the standard mileage rates for the rest of 2022.
- The new rate for business mileage will be 62.5 cents per mile.
- Medical mileage and moving expenses (for active duty military only) will go up to 22 cents per mile.
- Charitable mileage is set by statute and will remain at 14 cents per mile.
- New rates are effective July 1, 2022, through Dec. 31, 2022.
- The increase in mileage rates is due to a mismatch between supply and demand for petroleum products.
How Standard Mileage Rates Work
IRS optional standard mileage rates are prescribed by IRS Revenue Procedure 2019-46. This procedure lists the rules for deducting the costs of operating a vehicle for business, charitable, medical, or moving expenses.
Taxpayers are not required to use standard rates but may, instead, use the actual costs of driving the vehicle for an allowable reason. Normally, the IRS calculates standard mileage rates annually based on a determination of the average cost of maintaining a vehicle per mile.
For 2022, the extraordinarily high cost of fuel and petroleum products has resulted in a mid-year adjustment. As noted, this is unusual, having last occurred more than a decade ago in 2011, for the same reason. The rate adjustment in 2011 was 4.5 cents per mile from 51 to 55.5 cents per mile.
The table below shows the IRS optional standard mileage rate rates for the first and second half of calendar year 2022.
| Use | 1/1/22 – 6/30/22 |
7/1/22 – 12/31/22 |
|---|---|---|
| Business | 58.5 cents/mile | 62.5 cents/mile |
| Medical/Moving | 18 cents/mile | 22 cents/mile |
| Charitable | 14 cents/mile | 14 cents/mile |
Implications of TCJA
Be aware that the Tax Cuts and Jobs Act (TCJA) suspended all miscellaneous itemized deductions that are subject to the two percent of adjusted gross income floor, including unreimbursed employee travel expenses, for taxable years beginning after December 31, 2017, and before January 1, 2026.
Therefore, you cannot use the business standard mileage rate to claim a deduction for unreimbursed employee travel expenses during the suspension. Deductions for expenses that are deductible in determining adjusted gross income, however, are not suspended.
If, for example, you are a member of the Armed Forces, a state or local government official paid on a fee basis, or a performing artist, you may be entitled to deduct unreimbursed employee travel expenses as an adjustment to total income on line 12 of Schedule 1 of Form 1040.
And, although the TCJA suspends the deduction for moving expenses, the suspension does not apply to members of the Armed Forces on active duty who move due to a military order related to a permanent change of station (PCS).
An Increase in Demand Versus Available Supply
An unprecedented increase in the price of gasoline, which raises the cost of automobile maintenance, is behind the mid-year bump in IRS mileage rates. The cost of gasoline has hovered around $5 per gallon for some time now as a direct result of a mismatch between supply and demand.
According to AARP, there are four main causes for that increased demand.
- Supply disruptions caused by the war in Ukraine
- Weather extremes due to annual hurricane and tornado damage
- A switch to more expensive summer gasoline blends
- Increased summer travel
While other regional and national factors come into play, these four are the primary drivers of increased fuel costs and, as a result, an increase in mileage rates.
The Bottom Line
IRS optional standard mileage rates for business, medical, moving, and charitable deductions are usually set in the fall for the following calendar year, based on the average cost of maintaining a car for those stated uses on a per-mile basis.
Sometimes, as is the case for 2022 and was the case in 2011, a mid-year correction is needed, most often to account for a large increase in the cost of fuel and other petroleum products. The mid-year correction results in two sets of mileage rates for the year.
For 2022, those rates are 58.5 cents/mile for business mileage through June 30 and 62.5 cents/mile from July 1 through Dec. 31. The primary reason for the correction is increased demand compared to supply due to the war in Ukraine, weather events, a switch to summer gasoline blends, and summer travel.