The Internal Revenue Service says mileage rate deductions will increase in 2023. This is the second increase in less than a year. In July, the optional rate rose from 58.5 cents per mile to 62.5 cents. At the time, IRS leaders acknowledged the rare, mid-year increase was “in recognition of recent gasoline price increases.”
Mileage Rate Breakdown
As you know, the standard mileage rates apply to autos operated for some business, charitable, medical or moving purposes. The increase is in effect as of January 1, 2023.
- 65.5 cents per mile driven for business use, an increase of 3 cents from the mid-year increase
- 22 cents per mile driven for medical or moving purposes for qualified active-duty service members. This is consistent with the increased mid-year rate set for the second half of 2022.
- 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from last year.
So, what else is new for 2023? The IRS says new mileage rates apply to gasoline and diesel-powered vehicles, as well as electric and hybrid-electric models.
The standard rates for businesses are based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Finally, The IRS says taxpayers don’t have to use the standard mileage rates. Taxpayers still have the option to calculate the actual cost of using their vehicle rather than using the standard rates. However, the agency says can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Later on, they can choose either the standard mileage rate or actual expenses. Click here for the official release from the IRS, and more on how you can calculate your expenses.