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IRS Raises Standard Mileage Rate for Final Half of 2022

June 10 - Posted at 8:46 AM Tagged: , ,

Citing soaring gas prices, the Internal Revenue Service (IRS) on June 9 announced an increase in the optional standard mileage rate for the final six months of 2022.

Effective July 1 through Dec. 31, 2022, the standard mileage rate for the business use of employees’ vehicles will be 62.5 cents per mile—the highest rate the IRS has ever published—up 4 cents from the 58.5 cents per mile rate effective for the first six months of the year.

The rate is used to compute the deductible costs of operating an automobile for business use, as an alternative to tracking actual costs. Beyond the individual tax deduction, employers often use the standard mileage rate—also called the safe harbor rate—to pay tax-free reimbursements to employees who use their own cars, vans or trucks to conduct business for their employers.

Organizations are typically required to reimburse their workforce for the business use of their mixed-use assets, or personally owned assets such as vehicles that are required for their jobs.

Employers have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

The IRS normally updates standard mileage rates once a year in the fall for the next calendar year. For vehicle use from Jan. 1 through June 30, 2022, employers and employees should use the rates set forth in IRS Notice 2022-03.

While fuel costs are a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs, the IRS noted. For cars employees use for business, the portion of the standard mileage rate treated as depreciation will stay at 26 cents per mile for 2022.

Midyear increases in the optional mileage rates are rare. The last time the IRS made such an increase was in 2011.

 

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