December 20, 2021
The Internal Revenue Service (IRS) issued a new standard mileage rate for driving a car for business, charity, medical, or mobile purposes. The new IRS Standard Mileage Rate applies for travel on January 1, 2022.
New IRS Standard Mileage Rates:
- 58.5 cents per mile for business purposes
- 18 cents per mile for medical or travel purposes
- 14 cents per mile for charity purposes
The new Standard Mileage Rates will increase from 56 cents per mile for business purposes and to 16 cents per mile for medical or mobile purposes in 2021. The new Standard Mileage Rate has increased due to changes in fuel prices, fuel consumption, and insurance costs. The portion of the mileage traveled due to depreciation hasn’t changed, it remains 26 cents per mile in 2022, just like in 2021.
If you’re an employee who has a high actual cost of driving a vehicle for business purposes, you can deduct more if you can prove the actual expenses. We have an article where we explain the difference between the Standard Milege Rate and the Actual Expense Method.
The IRS sets new Standard Mileage Rates each year for Business Miles and Medical / Moving Travel. However, the charity rate is set by law [26USC 170 (i)] and does not change.
What does the IRS Standard Mileage Rate include?
- The same tariffs apply to all passenger cars, including cars, vans, pickups, and panel vans.
- The mileage rates cover variable costs for vehicle operations such as gasoline, oil, tires, maintenance, and repairs, and fixed costs for vehicle operations such as insurance, registration, depreciation, and leasing.
- The mileage rates do not cover the cost of parking and tolls and they do not vary by geography, it’s the same amount throughout The United States.
- Taxpayers cannot deduct the private usage of the vehicle
Mileage Reimbursement in 2022
Many companies use the IRS mileage rate to refund employees on business trips by car. Mileage Reimbursement is a profitable solution for both the employer and the employee.
Some colleges calculate college admission travel expenses based on commuting distance and distance from home to school. However, if public transport is available and the cost of your bus or train card is cheap, they tend to use that instead.
Limited Mileage Tax Deductibility?
Tax Cuts and Jobs Act of 2017 temporarily abolished various personal deductions until December 31, 2025, prohibiting taxpayers from claiming deductions for unpaid employee travel expenses. Previously, various personal deductions of over 2% of Adjusted Gross Income (AGI) had been deductible.
The law also eliminated the deduction for moving costs by the end of 2025. There are exceptions to active members of the U.S. military relocating for permanent relocation and members of protected areas servicing more than 100 miles from their homes.
There are exceptions for paid state and local government officials, certain performing artists, and elementary and junior high school teachers who can deduct unpaid employee travel expenses as an income adjustment in Schedule 1 of the IRS Form 1040 instead of personal deductions is in Schedule A.
Still, self-employed taxpayers can deduct mileage as operating expenses for Schedule C for a sole proprietorship, Schedule K-1 (IRS Form 1065) for partnerships and IRS Form 1120 or IRS Form 1120S for corporations.
More Mileage Tax Deduction in 2022?
Many businesses have been suffering because of the increased gas prices and other goods. Deducting 4% more than in 2021 (56 cents to 58.5) means that you’ll be able to deduct more when you file a Mileage Tax Deduction in 2022.
The increase of the Standard Mileage Rate in 2022 can mean a bit of a relief to many and also a good reason to make sure that you create a 100% IRS-Proof Mileage Log, that meets every expectation.
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