Updated June 13, 2022
Updated IRS Rates for 2022
Citing the "recent increase in fuel prices" and "a number of unusual factors," the IRS announced a mid-year update to the IRS standard mileage reimbursement rate. Beginning July 1, 2022, the standard mileage rate for business travel is now 62.5 cents per mile, an increase of 4 cents from the original 2022 rate. The new rate for deductible medical or moving expenses will be 22 cents from July 1.
Any business travel undertaken between January 1, 2022 and June 30, 2022 will still be considered under the previous IRS rate of 58.5 cents per mile.
For further details, view the full press release from the IRS.
IRS reimbursement rate Jan 1 - June 30, 2022
Beginning January 1, 2022 and now ending June 30, 2022, the standard mileage rate for business purposes is 58.5 cents/mile. This is a 2.5 cent increase from the 2021 mileage rate.
While many expected the rate to go to 59.5 cents or higher, the increased mileage rate still reflects the increased costs of driving and operating a vehicle for work purposes. For instance, gas prices are just one of the many operating costs that have increased in the past year. To determine the standard mileage rate, the IRS relies on a comprehensive independent evaluation of the fixed and variable costs of owning and driving a car for various purposes.
“Beginning on January 1, 2022, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021,
- 18 cents per mile driven for medical, or moving purposes for qualified active-duty members of the Armed Forces, up 2 cents from the rate for 2021 and
- 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2021.”
How this mid-year update affects the self-employed
Starting July 1, miles driven for work (not including commuting mileage) will have even more tax benefits. When tracking your mileage and calculating your tax deduction, you'll want to:
- multiply any tracked mileage driven between January 1, 2022 - June 30, 2022 by 58.5 cents per mile
- multiply any tracked mileage driven between July 1, 2022 - December 31, 2022 by 62.5 cents per mile
This means that any miles driven in the second half of the year will be worth even more in tax deductions than the first half of the year. This is just one reason why keeping detailed mileage logs is so important!
Need a better way to track your mileage for work and tax deductions? The Everlance app effortlessly and automatically records your mileage driven and gives you a tax-ready table at the end of the year showing your mileage, estimated deduction and more.
It’s important to note that you can only claim the standard mileage rate for a vehicle you own or lease and that you must log all of your mileage in order to claim it on your taxes. An eligible mileage log must include the date, destination and purpose of each business trip.
If you don’t want to manage a manual log and these calculations, use an automatic mileage tracking app to cover that tedious work for you.
How this mid-year update affects company reimbursement programs
The increase in standard mileage rate will affect all businesses that reimburse employees for driving for business purposes.
If your company reimburses employees on a cent per mile basis—but not the standard mileage rate—you should consider raising that rate to align with an increase in costs. Reimbursing your employees a fair amount keeps them happy, and in this tough labor market, it’s more important than ever to retain your employees. Also keep in mind that reimbursing employees up to the IRS standard rate is tax-deductible for you, and tax-free for your employees.
If you are currently reimbursing at the previous IRS standard rate, you are not obligated to adjust your reimbursement rates, but doing so is tax-free for you and your employees, and will help compensate employees for increasing fuel costs and other increasing costs associated with maintaining their vehicles.
If you manage a vehicle reimbursement plan at your workplace, consider switching to a FAVR (Fixed and Variable Rate) reimbursement program. FAVR is the fairest and most accurate way to reimburse your employees for owning and operating their personal vehicles for work purposes. Among the benefits of a FAVR program is keeping up with changing operating costs to fairly reimburse your drivers. Instead of just an annual (or semi-annual) update, the variable reimbursement rate is typically updated monthly.
If you’re interested in learning more about this program and how Everlance makes the switch easy, reach out to our sales team today.