Dec 31, 2022 - Economy

IRS raises 2023 mileage rate for business use by 3 cents

Sign outside building that says Internal Revenue Service Building

The Internal Revenue Service is increasing the mileage rate starting Jan. 1, 2023. Photo: Al Drago/Bloomberg via Getty Images

The Internal Revenue Service increased the "optional standard mileage rate" used to calculate tax deductions by 3 cents a mile for 2023.

The big picture: The increase brings the IRS rate to 65.5 cents per mile driven for business use, which comes after two increases in 2022, the federal agency announced in a statement.

Flashback: The IRS normally updates mileage rates once a year but in June announced a rare mid-year adjustment that went into effect July 1 because of high gas prices.

  • It was the first mid-year adjustment to the rate since 2011, the agency said in June.
  • The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile, the IRS said.

Context: 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.

Meanwhile, the national average gas price per gallon for regular unleaded was $3.179 Friday down from the record high of $5.016 on June 14, according to the latest data from AAA.

Reality check: The IRS has lowered the mileage rate after past increases, according to a chart on its website.

  • The rate was last lowered in 2021 by 1.5 cents before it increased twice in 2022.

2023 IRS mileage rate

Details: The IRS reimbursement rate was increased to 65.5 cents per mile.

  • For active-duty military members, the rate is 22 cents for deductible medical or moving expenses, the same as the July 2022 increase.
  • The 14 cents per mile rate for charitable organizations remains unchanged because it is set by statute, the IRS said.

Between the lines: The IRS said the rates “apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.”

Tax deductions for mileage

Of note: The IRS said that "under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses."

  • Taxpayers also have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates, the IRS said.

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