Midyear IRS mileage rate increase follows precedent, recent pleas

By Paul Bonner

While the IRS usually sets the optional standard mileage rates for computing deductible costs of operating an automobile only at the beginning of each calendar year, Thursday's boost represented the third time since 2008 it has done so as of July 1 for the remainder of the year.

Effective for miles traveled on or after July 1, 2022, the standard mileage rate for purposes of deductible business expenses is 62.5 cents per mile, an increase of 4 cents from the 58.5 cents per mile applicable to travel between Jan. 1, 2022, and June 30, 2022.

The rate for purposes of transportation primarily for, and essential to, a deduction of the cost of medical care under Sec. 213 also goes up by 4 cents, to 22 cents per mile from 18 cents in the first half of the year. The 18- or 22-cent rate also applies to moving expenses (restricted in 2018–2025 to members of the U.S. armed forces on active duty, pursuant to a military order and permanent change of station, per Sec. 217(g)).

In 2008, the rate increased from 50.5 cents to 58.5 cents from July, 1, 2008, through the end of that year (News Release IR-2008-82). In 2011, the IRS increased the rate effective July 1, 2011, from 51 cents to 55.5 cents (Announcement 2011-40).

In all three midyear adjustments, the IRS cited as its reason increases in the cost of fuel.

This year's increase also comes after two letters from members of Congress to IRS Commissioner Charles Rettig requesting it because of sharp fuel price increases this year.

The first, by Sens. Catherine Cortez Masto, D-Nev., and Michael F. Bennet, D-Colo., dated March 25, asked Rettig to provide a midyear increase but did not specify when it should take effect.

The second, dated May 13, was signed by 18 Democratic members of the U.S. House of Representatives. The principal signers were Reps. Ruben Gallego, D-Ariz., and Sharice L. Davids, D-Kan. The letter cited steep increases in gasoline prices since the beginning of 2022 as justifying an increase retroactive to March 1.

Neither congressional letter recommended how much the rate should increase, but they compared current gasoline prices to those in December 2021, when the IRS issued the 2022 rate in Notice 2022-3. Then, the nationwide retail average price was $3.40 per gallon, Masto and Bennet stated, which also is reflected in a graph on the website of the U.S. Energy Information Administration (EIA). The letter last week by the 18 representatives, citing the EIA, said the nationwide average in March 2022 was $4.30 per gallon.

The average in May 2022 was $4.545 per gallon according to the EIA, an increase of $1.145 from the $3.40 in December, or an increase of 33.7%.

The 4-cent actual increase announced Thursday represents a 6.8% higher rate for business travel and 22% increase in the moving and medical rate.

The IRS noted in Thursday's news release accompanying the announcement, however, that other costs besides fuel factor into the mileage rates, such as depreciation and insurance and other fixed and variable costs. And it noted that taxpayers always may instead use their actual allowable costs of operating a vehicle.

— To comment on this article or to suggest an idea for another article, contact Paul Bonner at Paul.Bonner@aicpa-cima.com.

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