IRS Increases Business Mileage Rate

June 10, 2022

The IRS has just announced a mid-year business mileage rate adjustment for the final 6 months of 2022. The new federal business mileage rate will be 62.5 cents per mile, which is a 4-cent increase from the rate of 58.5 cents that will be in force until June 31, 2022.

Why is the IRS increasing the business mileage rate?

The new federal mileage rate of 62.5 cents for business purposes is due to global events that have resulted in quickly rising inflation, shattered supply chains, and record-breaking fuel costs. These circumstances have dramatically changed the costs of operating a vehicle, thus the decision from the Internal Revenue Service comes as a slight relief for many small business owners, independent contractors, and employees as well, despite the fact that this 6,8% increase is still less than the annual inflation of 8,3% that was announced for May 2022.

fuel prices 2021 vs 2022

How long will the new IRS mileage rate apply?

The federal standard mileage rate of 62.5 cents will be in effect from July 1, 2022, through December 31, 2022.

Changes in medical and moving expenses

Between July 1 and December 31, 2022, people will be able to deduct 22 cents per mile for medical expenses, while active on-duty members of the military will also be able to deduct 22 cents per mile. Both of these rates were 18 cents per mile in the first half of 2022.

Charity expense deductions of 14 cents per mile have remained the same since 2011.

How to adjust mileage reimbursement in times like these

During periods of unpredictability and economic volatility, choosing the right type of mileage reimbursement is extremely important. Organizations are often expected to reimburse their employees for the commercial usage of their mixed-use assets, as well as individually held assets such as automobiles that are essential for their jobs.

While the IRS standard mileage rate provides a tax-free mileage reimbursement level, it does not account for real-time variation or regional diversity in expenses. Relying on a flat reimbursement system, such as car allowance as a lump sum or the IRS standard mileage rate can lead to squandered funds and substantial corporate liability. Companies who rely on these rates are also most likely not reimbursing employees for actual driving costs, and they are generating winners and losers by over or under-reimbursing employees.

Organizations that have embraced approaches like FAVR (Fixed And Variable Costs), which account for the multiple components of vehicle expenses, have generated considerable cost reductions while guaranteeing that their mobile workforces are fairly and appropriately compensated no matter how unpredictable the market gets.

MileageWise’s Teams Dashboard solution is for companies that are striving to be as fair as possible to their employees while optimizing the costs of operating all cars used by the company.

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I have been blogging for my readers since 2005, primarily about mileage logs and related subjects: about our software development, customer service, and sales experience. I am happy to share my opinion in a humorous manner on the great things in life - if necessary with a firm stance on the subject -, sharing my own raw thoughts.

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