Each year, the IRS releases a new standard mileage rate. The 2023 mileage rate was announcedin late December.
Business: 65.5 cents per mile
Medical / Moving: 22 cents per mile
Charity: 14 cents per mile
The IRS calculates the business rate based on an annual study of the fixed and variable costs of owning and operating a car. So when rates change, it’s due to common car costs—like gas prices or insurance premiums—changing.
For 2023, the IRS increased the standard mileage rate for business by 3 cents compared to the second half of 2022. Typically, the rate applies to all miles driven that year, but last year was unusual (though not unprecedented) in that the IRS released an increased rate for the second half because of how quickly gas prices shot up.
Ongoing high costs, especially for fixed costs like insurance, likely contributed to the decision to raise the rate again for 2023. The new rate of 65.5 cents per mile is the highest standard mileage rate for business that has ever been set.
Based on variable costs, the medical and moving rates will remain at 22 cents per mile for 2023. This decision likely reflects that gas prices have stabilized after the highs of last year.
There is also no change in 2023 to the standard mileage rate for charity, which is set by statute.
Beginning January 1, businesses reimbursing their employees for personal use of their vehicle using a Cents Per Mile program should look at updating their rate to the new standard, or if using your own rate, increase it to reflect current costs, up to the standard mileage rate. As the IRS reminds us, "under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses." Employees likely won't be too happy if they're getting reimbursed for less than their actual costs as they can't deduct the difference on their taxes.
If you're an independent contractor or self-employed, you will be able to deduct 65.5 cents per mile driven from your 2023 taxes. That deduction can really add up, so make sure you track every mile you drive for work.
Want more information? Head to the IRS’s page on Standard Mileage Rates.