The IRS just released the 2022 standard mileage rate, and it comes with some increases. The rate goes up for business use and medical or moving purposes for qualified active-duty members of the Armed Forces. But it stays the same for charitable organizations.
2022 IRS Mileage Reimbursement Rate
Here are the 2022 IRS mileage reimbursement rates for businesses, individuals, and other organizations:
- 58.5 cents per mile driven for business use. This is an increase of 2.5 cents from the 2021 rate.
- 18 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces. This is up by 2 cents from the 2021 rate.
- 14 cents per mile driven in service of charitable organizations. Because the rate is set by statute it hasn’t changed from the 2021 rate.
Effective Date
This notice is effective for the applied deductibles on or after January 1, 2022.
This includes:
- Deductible transportation expenses paid or incurred;
- Mileage allowances or reimbursements paid to a charitable volunteer or a member of the Armed Forces it applies to;
- Transportation expenses the charitable volunteer or such member of the Armed Forces pays or incurs;
- For purposes of the maximum fair market value (FMV) of employer-provided automobiles for which employers may use the fleet-average valuation rule or the vehicle cents-per-mile rule, and automobiles first made available to employees for personal use.
Notice From the IRS
As a taxpayer, you cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses Under the Tax Cuts and Jobs Act.
Additionally, as a taxpayer, you cannot claim a deduction for moving expenses. The only exception s for members of the Armed Forces on active duty moving under orders to a permanent change of station. If you are in the Armed Forces, you can get more information on the Moving Expenses for Members of the Armed Forces page.
Establishing the IRS Mileage Rate
If you ever wondered just how the IRS establishes or determines the mileage rate, here is how it goes about doing it.
The IRS calculates the mileage rate by taking into account the statistical analysis and cost data of the past year. And this of course means looking at several different metrics.
First, the IRS looks at the cost of owning and operating a vehicle, which includes the price of gas. It then considers insurance premiums, maintenance, and other related expenses associated with operating the vehicle.
With this base, the IRS also considers the rates for business miles driven and the rates for medical or moving purposes, which vary greatly.
For work-related purposes, the IRS determines the rate on the operating cost of a vehicle based on the annual study of fixed and variable costs.
Insurance, depreciation, maintenance, repairs, gas, oil, and tires are part of this assessment. When it comes to calculating the rate for medical moving purposes, only the variable costs are used.
The other rate is charitable mileage, which the IRS does not adjust in any way.
Reimbursing Your Employees
There is no federal law that requires employees to reimburse their employees for mileage and vehicle costs. The one federal exception is if failing to reimburse the employee decreases the net wages below the minimum wage.
When it comes to states, some states require it and others don’t. Make sure to keep up with the laws in your state if you have drivers working for you.
The act of reimbursing drivers for the mileage they drive is an accepted policy by the vast majority of businesses, small or large. If you don’t offer mileage reimbursement in today’s labor market you will definitely eliminate most drivers from applying for any openings.
Mileage reimbursement is a good practice and the way you can make it better is by implementing a policy for managing the process.
You can start by communicating your policy clearly when you first hire your drivers. Beyond that collect data that is relevant based on your location and track mileage and vehicle cost by the driver. You can also use an automated solution to keep track of the mileage and other data.
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