The Internal Revenue Service published Announcement 2022-13 on June 9, 2022, increasing the optional standard mileage rate for business use of employees’ automobiles from 58.5 cents per mile to 62.5 cents per mile for the final six months of 2022. Beginning July 1, 2022, and ending December 31, 2022, the new rate will be in effect. The old 58.5 cents per mile pricing will be in place until June 30, 2022.
As an alternative to tracking real expenditures, the rate is used to calculate the deductible costs of running a car for business purposes. Employers frequently use the standard mileage rate—also known as the safe harbor rate—to pay tax-free reimbursements to employees who use their own vehicles, vans, or trucks to perform business for their employers, in addition to the individual tax deduction.
Organizations are usually required to reimburse their employees for the commercial usage of their mixed-use assets, such as vehicles, that are essential for their duties, excluding regular commuting costs. Employers can calculate the actual costs of employees driving their own cars instead of utilizing conventional mileage rates.
The standard mileage rate is a national average rate that accounts for a range of costs like as gasoline, depreciation, insurance, and other fixed and variable expenses. Instead of recording actual costs, the optional business standard mileage rate is used to calculate the deductible costs of driving an automobile for business purposes. The federal government and many businesses use this rate as a baseline for calculating mileage reimbursements for their employees. Instead of using the normal mileage rates, employers might continue to utilize various techniques to calculate the actual expenses of using their car.
Mid-year increases in the optional mileage rates are rare. The last time the IRS made such an adjustment was in 2011. Employers should verify that the rate increase, which will take effect on July 1, 2022, is correctly accounted for.
At Gift CPAs, our team is here to help you better understand the current rates so you can calculate how much you are saving on gas expenses with an accurate number, which will also help keep track of any potential tax implications. Contact us to make an appointment or connect with your Gift CPAs accountant directly. We look forward to meeting you virtually or at one of our five locations in Harrisburg, Mechanicsburg, Myerstown, Ephrata, or Lancaster!