IRS Boosts Standard Cents-per-Mile Rates For July 1 Through December 31, 2022

June 2022

For the final six months of 2022, the standard mileage rate for business travel will increase by 4 cents per mile, from 58.5 to 62.5 cents per mile, according to IRS Announcement 2022-13. The rate for deductible medical or moving expenses will likewise increase from 18 to 22 cents per mile.




Generally, the adjustment is made annually but the IRS issued a rare mid-year announcement to better reflect recent increases in fuel prices. The last mid-year adjustment was in 2011 under similar rising fuel prices.

Unfortunately, the IRS cannot increase the 14 cents-per-mile rate for using a personal automobile in connection with charitable contribution deductions, because that rate is fixed by statute in IRC Section 170(i). Accordingly, Congress would need to increase that rate.
 

Accountable Plan Rules

The optional business standard mileage rate can be used to compute the deductible costs of operating a personal automobile for business use in lieu of tracking actual costs and is often used to calculate the reimbursement to employees. For the reimbursement to be tax-free, the employee must submit an expense report under an “accountable plan” established by the employer. Accountable plans are not required to be in writing, but must include these three rules:
   
  • There is a business connection to the expenditure.
  • There is adequate accounting by the recipient within a reasonable period of time (60 days is an IRS safe harbor for being a reasonable period of time).
  • Excess reimbursements or advances are returned within a reasonable period of time.
 

Business Connection vs. Commuting

Tax-free mileage allowances for using a personal vehicle to commute to work have never been allowed, since commuting is generally a personal (not business) expense. The IRS defines commuting as expenses incurred traveling between an individual’s residence and a work location that is not temporary.

IRC Section 132(f) allows for tax-free qualified transportation fringe benefits (i.e., parking, public transit or commuter highway vehicles up to $280 per month for 2022), but that does not include mileage reimbursements.




During the COVID pandemic (and most likely beyond), many employers required (or allowed) employees to work remotely. Employers that do not dictate where employees live must determine where the employee’s “tax home” is located in order to sort out business vs. commuting expenses. Generally, an employee’s tax home is the entire metropolitan area that includes his/her principal place of business, which may or may not be in the employee’s personal residence. Criteria for deductibility or tax-free reimbursement of the expense include:
   
  • Reasonable and necessary
  • Incurred while away from the employee’s tax home and
  • Incurred in the pursuit of the employer’s business