The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Beyond the individual tax deduction, employers often use the standard mileage rate—also called the safe harbor rate—to pay tax-free reimbursements to employees who use their own cars, vans or trucks to conduct business for their employers.
The Internal Revenue Service normally updates the mileage rates once a year in the fall for the next calendar year. With recent increases to fuel prices, the Internal Revenue Service announced an increase in the optional standard mileage rate for the final 6 months of 2022. Effective July 1, 2022, the standard mileage rate for business travel will be 62.5 cents per mile. The IRS provided legal guidance on the new rates in Announcement 2022-13.
For travel from January 1st through June 30, 2022, taxpayers should use the rates set forth in Notice 2022-03.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. If you have any questions as it pertains to your situation, please contact our office.