IRS Standard Mileage Rates Hiked for 2022

The IRS announced (IR-2021-251, 12/17/21) that standard mileage rates are on the rise for the 2022 tax year.

The increases are bigger than they’ve been in recent years, reflecting higher prices at the gas pumps. The recordkeeping requirements are, however, significantly less burdensome.

The 2022 rates for vehicles, including passenger automobiles, vans, pickups and panel trucks, are as follows:

• 58.5 cents per mile for business purposes (up 2.5 cents from 2021)
• 18 cents per mile for medical or qualified moving purposes (up 2 cents from 2021)
• 14 cents per mile for charitable purposes (the same as in 2021)

Add related tolls and parking fees to these amounts. For instance, if someone drives 10,000 business miles in 2022 and incurs $500 in tolls and parking fees, they can deduct $6,350 (58.5 cents x 10,000 + $500).

Note that the Tax Cuts and Jobs Act (TCJA) generally suspended the deduction for moving expenses from 2018 through 2025. However, write-offs are still available to military personnel on those on active duty who otherwise meet the requirements. 

In recent years, any increases have been relatively small and the mileage rates have even decreased at times. Also, the standard mileage rate for charitable travel is set by statute and hasn’t budged from 14 cents per mile in decades.

Taxpayers mostly opt for the standard mileage rate in the first year the vehicle is available for business use. In later years, they can generally choose either the standard mileage rate or deduct actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Finally, despite the latest increases in the standard mileage rates, you may advise your clients to keep track of all their actual expenses. Generally, this will result in a bigger deduction for 2022, especially for business driving.

Because the TCJA allows generous depreciation deductions for vehicles placed in service in 2022, including Section 179 deductions and first-year “bonus” depreciation, many clients will come out ahead by deducting actual expenses. In contrast, depreciation is already built into the standard mileage rate.

Go the extra mile: Figure out the best approach for your clients. Depending on the calculations you may advise them to switch to the actual expense method for 2022. If a client qualifies, they can deduct actual expenses this year, even if the standard mileage rate was claimed for the same vehicle in previous years. At the very least, inform your clients about the new tax rules of the road.