In another year-end tradition, IRS has announced – after extensive scientific research and calculations – what its standard mileage rates will be for next year’s tax returns. These new rates don’t affect the 2023 returns that will be filed in 2024. These new rates will be for the 2024 returns that will be filed in 2025, but will be useful right away for businesses that base their employee reimbursements and customer charges on the IRS rates.

From the IRS news release:

Beginning on Jan. 1, 2024, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 67 cents per mile driven for business use, up 1.5 cents from 2023.
• 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, a decrease of 1 cent from 2023.
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023.

These rates apply to electric and hybrid-electric automobiles as well as gasoline and diesel-powered vehicles.

Just as with the annual inflation adjustments for tax brackets and deductions that I covered a little while ago, there are some items that have been carved into stone by our imperial rulers in DC and are not allowed to be adjusted for changes in the real world costs. Miles driven on behalf of charities have been established at 14 cents since 1997 and I have seen no inclination from anyone in DC to bring that more in line with the business mileage rate of 67 cents. To use the same rate for both kinds of driving would be the sane and logical thing to do; both of which are foreign concepts in the Twilight Zone known as Washington DC.

Since numbers are an obsession of mine – a common side effect of being a CPA – I couldn’t help noticing the correlation between the IRS deduction per business mile and the Post Office’s charge for a standard single ounce stamp. For the year 2000, the IRS mileage rate was 32.5 cents, and it is now up to 67 cents for 2024. USPS charged 33 cents for one ounce in 2000 and is currently up to 60 cents, with multiple increases planned for 2024.

IRS has released this press release with a slightly misleading headline today:

IRS increases mileage rate for remainder of 2022

Although the “remainder of 2022” includes the rest of June, the increased rates don’t take effect until July 1, 2022.

For Business purposes, the IRS allows 58.5 cents per mile for what was driven between 1/1/22 and 6/30/22 and 62.5 cents per mile for 7/1/22 through 12/31/22.

For Medical and Moving deductions, IRS allows a deduction of 18 cents per mile from 1/1/22 until 6/30/22 and 22 cents per mile for the second half of 2022.

For miles driven on behalf of charities, the rate remains fixed at 14 cents per mile because of the idiocy of our rulers in Congress who omitted any inflation adjustments.

In normal years, IRS adjusts its standard mileage deduction rate once a year for those taxpayers who don’t want to keep track of their actual expenses, as well as for employee reimbursements.

The standard rate, which has been 58.5 cents per mile for business purposes since the beginning of 2022, is intended to include the operating and ownership costs of an “average” car based on prior year (2021) costs. These include such things as fuel, insurance, oil changes, repairs, registration, washing, and tires. It also includes a factor for the depreciation of the vehicle.

Having been in the tax business for over 45 years, I can remember some years where fuel prices shot up as quickly as they are currently doing. In some of those cases, IRS increased their mileage rates mid-year. Sometimes this was as of July 1, while in other cases it was as of October 1. This meant that taxpayers had to keep track of and report their business miles separately for each time period.

I haven’t seen anything from IRS indicating that this will happen this year, but, given the insane price increases in gasoline and diesel we have been dealing with all over the country, it seems inevitable. The higher purchase prices for both new and used vehicles makes an increase in the depreciation component of the standard mileage rate also very likely.

Whether IRS raises its standard deduction rate or not, this is a perfect example of why it is important for everyone to keep track of their actual vehicle expenses because they will almost certainly be higher than whatever standard rate IRS allows for 2022.

Update 5/25/22: During today’s CPELink Monthly Tax Update, there was a mention of a recent letter that some CongressCritters wrote to the IRS Commissioner, requesting an increase in the standard mileage allowance to account for the drastic increases in fuel prices since 2021.
Press Release From Arizona Congressman
Copy of Letter