The seemingly never-ending rise in gas prices in the United States caused the IRS to raise its standard mileage deduction for 2022 on Thursday.
The increase announced today will take effect from July 1 to the end of 2022. The new rate is 62.5 cents per mile for business use of a car. That’s 4 cents more than the 58.5 cents the IRS is paying back through June.
The new rate for kilometer deduction for travel and medical costs of a vehicle is a maximum of 22 cents, with effect from 1 July. That’s 18 cents in the first half of 2022.
Here’s an overview of the changes:
Updated standard kilometer deduction rate for 2022Vehicle use Mileage 1 Jan. June 30, 2022 (cents per mile) Mileage July 1 through Dec. 31, 2022 (cents per mile)Business58,562.5Relocation/Medical1822Charity1414
IRS updates standard mileage deduction for the remainder of 2022
The standard mileage deduction can be used to determine the deductible costs of the business use of a car. A taxpayer does, however, retain the option to calculate the ‘actual costs’ of the business use of his vehicle instead of applying the standard rate for kilometer deduction.
“In recognition of recent increases in the price of gasoline, the IRS has made this special adjustment for the closing months of 2022,” the IRS said in a subscriber email newsletter Thursday.
“The IRS is adjusting standard mileage rates to better reflect the recent rise in fuel prices. We are aware that some unusual factors have come into play with regard to fuel costs, and we are taking this special step to help taxpayers, businesses and others using this rate,” said IRS Commissioner Chuck Rettig.
Normally, the IRS updates its standard mileage deduction at the end of a calendar year.
Any business travel expenses booked in the first half of 2022 (until the end of June) will still be subject to the rate of 58.5 cents
Rise in gas prices affected IRS decision to update mileage deduction
The skyrocketing gas prices affecting all U.S. businesses are largely responsible for this update from the IRS. But the agency says other factors, such as depreciation and insurance costs, are also at play.
But the decision was primarily due to rising gas prices, and the IRS had recently heard from elected officials about the need to update the standard mileage rate midway through this year to offset those specific rising costs.
Gas prices across the country hit new record highs on Thursday. According to AAA.com, the average price of regular unleaded gas in the US is $4.97. The record price for a liter of diesel is now $5.74.
The move is not without precedent. IRS notes that it last updated the mileage deduction in mid-2011.
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