IRS raises mileage rate amid high gas prices
As gas prices continue to rise, the Internal Revenue Service is increasing the "optional standard mileage rate" used to calculate tax deductions by 4 cents a mile for the last six months of 2022.
Driving the news: The "special adjustment" starts July 1 and brings the IRS rate to 62.5 cents per mile. It comes after a 2.5-cent increase went into effect in January and represents the first mid-year adjustment made since 2011, the IRS said.
- Taxpayers use the rate to calculate the "deductible costs of operating an automobile for business and certain other purposes" instead of tracking actual costs.
- It's also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.
Why it matters: The IRS normally updates mileage rates once a year in the fall but officials said the federal agency was making the rare mid-year adjustment because of the recent gas price increases.
- Gasoline prices are a key inflation indicator to the American public, and their persistent climb is a headwind for both consumer spending — as gas bills eat into household budgets — and politicians hoping to stay in power, writes Axios' Matt Phillips.
- The national average price is $4.986 Friday, according to the latest data from AAA. GasBuddy said the average price reached $5 per gallon on Friday.
What they’re saying: "The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices," IRS Commissioner Chuck Rettig said in a statement.
- “We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate.”
New IRS mileage rate for 2022
Details: The IRS reimbursement rate will increase to 62.5 cents per mile starting July 1, up 4 cents.
- For active-duty military members, the new rate will be 22 cents for deductible medical or moving expenses, also up 4 cents from the current rate.
- The 14 cents per mile rate for charitable organizations remains unchanged because it is set by statute, the IRS said.