The business mileage rate is increasing by 4 cents, to 62.5 cents per mile, while the medical and moving mileage is also increasing by 4 cents, to 22 cents per mile, for the final six months of 2022, the IRS recently announced. The previous rates of 58.5 cents for business mileage and 18.0 cents for medical and moving mileage still apply for the first six months of 2022.
In recognition of the recent spike in gas prices, the IRS made this special adjustment for the second half of 2022. The new rate is effective July 1, 2022. The IRS normally updates the mileage rates once a year in November or December for use during the subsequent year.
“We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses, and others who use this rate,” said IRS Commissioner Chuck Rettig in an IRS press release.
The value of your mileage deduction could increase 7%
Here’s how the business mileage increase could affect the bottom line on your 2022 tax return:
Example: You’re in the 12% tax bracket and have 1,000 business miles to report on your 2022 tax return. You drive 500 miles the first six months of 2022, which will be recorded using the 58.5 cents rate. You drive another 500 miles the second six months of 2022, which will be recorded using the 62.5 cents rate.
- 500 miles x 58.5 cents = $292.50 deduction x 12% tax rate = $35.00 reduction in taxes
- 500 miles x 62.5 cents = $312.50 deduction x 12% tax rate = $37.50 reduction in taxes
The 58.5 cents mileage rate results in a $292.50 tax deduction for you. Since you’re in the 12% tax bracket, this deduction will lower your taxes by $35.00.
The 62.5 cents mileage rate results in a $312.50 tax deduction for you. With a 12% tax rate, this deduction will lower your taxes by $37.50, which is $2.50 or 7% more than the $35.00
deduction you received for the first six months of 2022.
A reminder to keep great mileage records
The IRS mandates that you track your vehicle expenses as they happen (this is called contemporaneous recordkeeping). You’re not allowed to wait until right before filing your tax return to compile all the necessary information needed to claim a vehicle deduction. Whether it’s a physical notebook you stick in your glove compartment or a mobile phone app, pick a method to track your mileage and actual expenses that’s most convenient for you.
So be sure to keep great records so you can take advantage of this increase to the business, medical, and moving mileage rates.
Should you have questions about any of the above increases, I encourage you to reach out to our team of experts here: https://bas-pc.com/appointment-center/.