The federal tax deduction that corporations and self-employed taxpayers can use for their work-related miles on the road has suddenly become more generous, in a nod to record-breaking gas prices.
The optional standard mileage rate for business driving will increase to 62.5 cents per mile starting in July, the Internal Revenue Service said announced Thursday. That’s more than the rate of 58.5 cents per mile first announced in December.
It’s a tax administration tweak that won’t apply to everyone, but it’s a notable development.
When it comes time to calculate the standard mileage rate, the IRS usually comes out with their numbers once a year. 2011 was the last time the IRS made a mid-year adjustment to the rate.
The four-cent tax hike is intended to “better reflect the recent rise in fuel prices,” IRS Commissioner Charle Rettig said. According to GasBuddy, the IRS announcement came on the same day that the national gas average broke through $5 a gallon.
“We are aware that a number of unusual factors have come into play in relation to fuel costs, and we are taking this extra step to help taxpayers, businesses and others who use this rate,” Rettig said.
The tax rate applies to corporate and self-employed taxpayers and is not intended to mitigate commuting costs, Barbara Weltman, author of “JK Lasser’s Small Business Taxes 2022: Your Complete Guide to a Better Bottom Line,” previously told MarketWatch.
Employees also don’t have access to the fare, but nothing prevents bosses from reimbursing workers for travel expenses, Weltman noted. There are apps that can track mileage for tax purposes.
The new rate of 62.5 cents per mile applies to eligible road travel from July 1 through December 31. The 58.5 cent rate applies to eligible miles earned from January 1st through June 30th.
Four cents more might not sound like a lot, but with so many escalating costs, every little bit more can help.
Keep in mind these rates aren’t mandatory, the IRS said. “Taxpayers always have the option to calculate the true cost of using their vehicle rather than using standard mileage rates,” the agency said.
But that can require even more documentation than what’s required for taxpayers who take the standard mileage rate. And the tax authorities are already expecting records in terms of tariffs, including mileage counting, destination and purpose.
https://www.marketwatch.com/story/irs-makes-mileage-deduction-for-gas-costs-more-generous-in-rare-mid-year-move-11654811989?rss=1&siteid=rss The IRS is making the mileage deduction for gas costs more generous for infrequent mid-year moves