Every year around mid-December, the IRS announces the mileage reimbursement rate for the following year. The rates announced in December 2021 are effective from January 1, 2022, and provide the guideline for taxpayers that would be useful when filing their tax returns in 2023 for the year 2022 if they intend to claim a mileage deduction for owned or leased vehicles. These rates are like IRS allowances for the deductible part of the driving cost for business purposes and charitable, moving, and medical purposes. Except for charitable organization driving, the rates of which are set by statute, the other rates are adjustable on an annual basis depending on the nature of the use of the vehicle, as specified.
The mileage reimbursement rate for 2022
One of the essential points to note is that it is up to the taxpayer whether they want to take advantage of the reimbursement rate. Instead of being based on mileage, taxpayers can calculate the actual cost of using their vehicle.
Let us look at the latest mileage rates that follow the same calculation basis as that of the mileage reimbursement 2021.
- For businesses, the mileage reimbursement rate is 58.5 cents per mile.
- For vehicles driven by the Active members of the armed forces and medical care, the reimbursement rate is 18 cents per mile.
- The reimbursement rate is 14 cents per mile for vehicles driven by charitable organizations.
- For cars used by employees for businesses, the IRS treats part of the standard mileage rate as 26 cents per mile depreciation.
For determining the standard mileage rate for businesses, moving, and medical purposes, IRS considers the annual changes in the operating costs of a vehicle. A statute forms the basis for setting the rate of charitable organizations.
Rates up from 2021
You will notice the following changes by comparing the current mileage reimbursement rate with the IRS mileage reimbursement rate 2021.
- The mileage reimbursement rate has gone up from 56 cents to 58.5 cents for businesses.
- For vehicles driven by the Active members of the armed forces and medical care, the reimbursement rate increase is 2 cents.
- However, there is no change in vehicle rates driven by charitable organizations.
The rate revision trend follows a pattern that becomes evident by comparing the rates of the previous years.
Rules for claiming reimbursement
For claiming a deduction by using the standard mileage, you must follow the rules set by IRS. Besides owning or leasing the vehicle, you must log the total mileage for the year, the mileage for each deductible use, and the purpose of the trip with the date and destination. You must use it the first year your vehicle is available for business for the availing deduction, and you can choose between the actual expenses and the standard mileage for the subsequent years. You must use the standard mileage rate for the entire lease period for leased vehicles, including renewals.
Optimal mileage drivers would find the mileage reimbursement rate ideal.
