Gas prices at the pump took a wild ride in 2022, adding another layer of complexity for those claiming mileage deductions on their 2022 tax returns.
What is the typical IRS mileage rate? Important note: There is no single number for 2022 federal income tax returns.
Because of last year’s extremely volatile gas prices, the Internal Revenue Service took the unusual step of raising some mileage rates for the second half of the year, beginning in July. A midyear increase is not common. The IRS last did something like this in 2011.
What are the two 2022 mileage rates?
You have two mileage rates for business use for the 2022 tax year. Travel from January to June last year cost 58.5 cents per mile, and trips from July to December cost 62.5 cents per mile.
To make matters even more complicated, the IRS announced that beginning in January, the standard mileage rate for business use will be raised to 65.5 cents per mile driven for business purposes in 2023. However, keep in mind that this rate does not apply to your 2022 tax return.
Another helpful hint: These rates apply to electric and hybrid-electric vehicles, as well as gasoline and diesel vehicles.
Who is even eligible for a mileage deduction?
As you prepare your 2022 tax return, keep in mind that claiming mileage for a tax break isn’t as simple as it used to be.
Under the Tax Cuts and Jobs Act, which is still in effect until 2025, the IRS business standard mileage rate cannot be used to claim an itemised deduction for unreimbursed employee travel expenses. You’re out of luck if your employer does not reimburse mileage for business travel.
Cheaper gas helps to slow inflation: According to the Consumer Price Index report, a drop in gas prices helped to slow inflation again in December.
Gas prices are expected to rise in 2023:
Gas prices are falling but are expected to rise again. What will the price of gasoline be in 2023?
Under the Tax Cuts and Jobs Act of 2017, taxpayers cannot deduct mileage for regular moving expenses.
If you are a member of the armed forces on active duty and are being transferred to a permanent change of station, you can deduct your moving expenses.
The IRS standard mileage rate is a critical benchmark used by the federal government and many businesses to reimburse employees for out-of-pocket mileage expenses.
It’s also important at tax time for many people, including self-employed people, who can claim business mileage on their tax returns.
The IRS rate takes into account the cost of filling up your tank as well as other business-related expenses. According to the IRS: “The standard business mileage rate is based on an annual study of the fixed and variable costs of operating a vehicle. The rate for medical and moving services is determined by variable costs.”
The self-employed continue to benefit from a tax break.
Taxes and new parents:
New parents’ tax season guide for 2023: What you should know about the Child Tax Credit and other topics
Your tax guide for 2023:
Are you prepared to file your tax returns? Here’s what you need to know to file your taxes in 2023.
For those who run their own businesses, the mileage deduction is often critical.
A self-employed taxpayer who files a Schedule C can deduct expenses for business mileage at the standard rate.
Aside from the standard mileage rate, taxpayers can calculate the deduction using actual expenses.
Breaking down the actual costs for the deduction is more difficult for taxpayers than simply using the standard mileage rate. For example, you’d have to figure out how much it costs to run the car or truck for the number of miles dedicated to business. This includes the cost of insurance, gas, repairs, tyres, and other expenses.
For the same vehicle, you can only use one method — the standard mileage rate or the business portion of actual expenses.
“Many of my Schedule C clients use mileage because it’s so simple,” said George W. Smith, a partner at Andrews Hooper Pavlik PLC in Bloomfield Hills, Michigan. “The only thing they need to keep track of is mileage.”
According to him, some clients still go with actual expenses, but this has been decreasing over time.
He explained that those who are self-employed in a variety of fields, as well as those who own rental properties and claim mileage for trips for repairs, maintenance, or collecting rent, can use mileage.
