Starting January 1, 2022, the standard mileage rate for business purposes is going up to 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 update affects the self-employed
Starting January 1, you should be tracking your mileage deductions by multiplying miles driven x 58.5 cents. This means that you will be able to deduct more for every work mile driven than in 2021.
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 your mileage to deduct it. 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 like Everlance to do that tedious work for you.
How this 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, if you manage a vehicle reimbursement plan at your workplace, you should 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 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.