Changes on the Standard Mileage Deduction

Photo by Samuele Errico Piccarini on Unsplash

With rising energy prices making up almost half of the increase in inflation, it has caused an additional amount of stress in our economy. While eye-popping gas prices keep inflation surging, the IRS made an adjustment in recognition of the recent increases in the cost of gasoline.  This adjustment is normally made annually, but IRS Commissioner Charles Rettig said the Service was taking this “special step to better reflect the recent increases in fuel prices.”

Although the business standard mileage rate is optional, it is used to determine the deductible costs of operating an automobile for business instead of tracking actual costs. In addition, the federal government along with many businesses uses this rate as a benchmark in order to reimburse their employees for mileage.

This new guidance issued by the IRS means that the mileage rate for January 1 through June 30, 2022, is still 58.5 cents/mile. The increase affects the rate for July 1 through December 31, 2022, which is now 62.5 cents/mile.

For this reason, it is even more important to keep a mileage log to calculate the deduction properly. Your log can lead to significant savings through the mileage deduction or as a business expense. Remember to record the date, destination, and business purpose of each trip along with the odometer readings at the start and end of the year. Keeping a thorough record of all vehicle-related costs, including standard maintenance and repairs can also be helpful in optimizing between actual cost vs the standard deduction.

By Fabiana Suskin, Accounting Associate