Tax Breaks

IRS Increases Mileage Rates Because of High Gas Prices

The higher mileage rates, which are used to calculate certain tax deductions for business and other uses of a car, took effect on July 1.

In response to rapidly rising gas prices, the IRS took the unusual step of increasing the standard mileage rates in the middle of the year (they're normally adjusted for inflation only once per year). The mileage rates that were raised are used to calculate tax deductions for the use of an automobile (i.e., a car, pickup truck, or van) for business, medical, and certain moving expenses. The new rates apply from July 1 to December 31, 2022, while the previously established rates apply for the first half of the year.

Three of the four mileage rates increased by 4¢ per mile (one of the rates didn't change at all). For the second half of 2022, the standard mileage rate for business use of an automobile increased from 58.5¢ to 62.5¢ per mile. The rates for deductible medical travel and moving expenses for active-duty members of the military rose from 18¢ to 22¢ per mile. The mileage rate for charitable use of a passenger car remains at 14¢ per mile, since it's fixed by law and not subject to adjustments for inflation.

Standard Mileage Rates for 2022

Deduction

January to June 2022

July to December 2022

Business Use

58.5¢ per mile

62.5¢ per mile

Medical Travel

18¢ per mile

22¢ per mile

Military Moving Expenses

18¢ per mile

22¢ per mile

Driving for Charity

14¢ per mile

14¢ per mile

In addition to calculating business expense deductions, the mileage rate for business use is also used by the federal government and many businesses to reimburse employees for the business use of their personal vehicle.

Tax Deduction for Business Use of a Vehicle

Any self-employed person who makes deliveries, drives to a client's location or otherwise uses a personal car, van or truck for work-related purposes can claim a tax deduction for the business use of their vehicle. There are two ways to calculate the deduction – you can use the standard mileage rates listed above or your actual car expenses.

If you opt to use the actual expense method, simply add up all your car-related expenses for the year – gas, oil, tires, repairs, parking, tolls, insurance, registration, lease payments, depreciation, etc. – and multiply the total by the percentage of total miles driven that year for business reasons. For example, if your total annual car costs are $5,000 and 20% of your miles were for business, then your deduction is $1,000 ($5,000 x .2).

Note that the itemized deduction for unreimbursed employee travel expenses has been suspended until the 2026 tax year. So, the business standard mileage rate can't be used by employees to claim a deduction for their work-related travel costs. However, "above-the-line" deductions for business-related expenses were not suspended. So, for example, members of the National Guard or military reserves, state or local government officials paid on a fee basis, and certain performing artists can still deduct unreimbursed employee travel expenses and use the business standard mileage rate.

Tax Deduction for Medical Travel

If you itemize deductions on your tax return, you can deduct unreimbursed medical expenses that exceed 7.5% of your federal adjusted gross income. The list of medical expenses that qualify for the deduction is long and includes obvious expenses, such as those for doctor bills, medicine, blood tests, bandages, crutches, dental work, oxygen, nursing care, and the like. But it also includes the cost of transportation primarily for, and essential to, medical care.

If you use your own automobile for medical travel, you can deduct actual out-of-pocket expenses such as the cost of gas and oil, but you can't include depreciation, insurance, general repair, or maintenance expenses. As with the deduction for business use of your car, you can elect to use the standard medical mileage rates above instead of using your actual expenses. Either way, you can tack on parking fees and tolls, too.

According to the IRS, expenses you can't deduct include:

  • Going to and from work, even if a medical condition requires an unusual means of transportation;
  • Travel for purely personal reasons to another city for an operation or other medical care.
  • Travel that is merely for the general improvement of your health; and
  • The costs of operating a specially equipped car for other than medical reasons.

Tax Deduction for Moving Expenses of Military Personnel

It used to be that anyone could deduct job-related moving expenses if your new workplace was at least 50 miles farther from your old home than your old home was from your old workplace. However, the 2017 tax reform new tax law killed the moving expense deduction, but with one significant exception – if you're an active member of the U.S. Armed Forces, the cost of any move associated with a permanent change of station is still deductible if the move was due to a military order. This benefit for military families includes a move from your home to your first post of active duty, a move from one permanent post of duty to another, and a move from your last post of duty to your home or to a nearer point in the U.S.

You can write-off the unreimbursed costs of getting yourself and your household goods to the new location. If you drive your own car for a move in 2022, use the standard mileage rates above plus what you paid for parking and tolls. When it comes time to file your tax return, use Form 3903 to tally your moving deductions.

Tax Deduction for Charitable Use of a Car

Most people are generally aware of the charitable tax deductions available to people who itemize, but there's an often-overlooked aspect of the deduction. In addition to donations of cash or unused items in your home, you can also deduct out-of-pocket costs incurred while doing work for a charity. This includes the costs associated with driving your car for charity. For example, you can deduct car expenses if you use your own vehicle to transport food and supplies to a nonprofit organization's soup kitchen.

As with the other car-related expenses discussed above, you can either track your actual costs or use the standard mileage rate to calculate your deduction. And, of course, don't forget to add the cost of parking and tolls.

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