In the wake of rising inflation, the IRS raised the 2022 mileage deduction rate. The rate will rise from 58.5 cents per mile driven to 62.5 cents. Federal leaders say the increase comes as gas prices reach new record highs across America. Worse, experts predict prices at the pumps to rise even higher this year. Some predict prices of $6 per gallon by Labor Day, fueling this year’s mileage increase.
Record Inflation Fuels Mileage Deduction Increase
Businesses use the Standard Mileage Deduction rate to determine operating costs for using vehicles for business use instead of tracking actual expenses. As records continue in the wrong direction, Federal Leaders hope the increase will help Americans struggling at the pump. In a release, Internal Revenue Service Commissioner Chuck Reddig says, “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.”
The IRS notes notes the standard mileage deduction of 58.5 cents is in effect through June 30. Those rates are outlined in Notice 2022-03. The new rate of 62.5 cents goes into effect on July 1. Commissioner Reddig says this rate will last through the year’s final six months. Reddig also points out the agency bumped up the rate for medical and moving expenses by 2 cents, from 16 to 18 cents. Again, the hope is the four-cent increase will help as prices for just about everything rise.
In addition to high fuel prices, the IRS says depreciation, insurance, and fixed and variable costs play a role in determining the mileage deduction rate. Finally, the agency says the standard mileage deduction is optional. The IRS notes businesses still have the opportunity to calculate the actual costs of using vehicles instead. Also, this recent action does not change charitable organizations’ 14 cent per mile rate.