On June 9, 2022, the IRS announced an optional increase to the standard mileage rate for the final half of 2022 (Announcement 2022-13). The IRS normally updates mileage rates once per year, in the fall for the upcoming calendar year, however, they chose to raise rates mid-year given the significant recent gasoline price increases.
The new rates go into effect on July 1, 2022. The standard mileage rate for business travel will increase 4 cents to 62.5 cents per mile. Medical or military moving mileage (must be active-duty member of the military) also increase 4 cents to 22 cents per mile. Charitable mileage reimbursement rates did not change and remain at 14 cents per mile.
The business standard mileage rate may be used to substantiate the deductible costs of operating an automobile for business use in lieu of tracking actual costs. Employers that reimburse employees’ travel expenses tax-free must not lose sight other requirements for this treatment explained in Rev. Proc. 2019-46. The large shift in workforce dynamics over the past couple of years requires many employers to carefully review business travel arrangements for proper tax treatment. To learn more about tax issues regarding employee business travel, refer to this article.
Many employers looking to assist employees with rising costs will find this rate increase welcome, though possibly not enough to cover the drastic gas price increases. If an amount higher than the standard rate is paid, the additional amount is taxable income to employees.