Higher gas prices have one silver lining: a higher IRS mileage deduction standard rate.
Every year, the IRS updates the standard amount one can deduct for each mile driven for business or miles driven for charitable purposes. The amount of the IRS standard mileage rates deduction is based upon various different factors, but the price of gasoline figures most prominently into the change each year. (Things like depreciation, and wear and tear, are included, but don’t vary much from year to year.)
In a normal year, the IRS resets the mileage rate for the following year late in the year and that rate stays the same for the entire year. However, in years where gas prices go crazy and the cost of operating a vehicle goes up substantially, the IRS will increase the standard mileage rate deduction in the middle of the year to correspond to the new reality on the ground, or on the highway. This happened this year when the IRS increased the 2022 standard milage deduction from 58.5 cents to 62.5 cents. The higher rate takes effect on July 1, 2022. Any miles driven on or after July 1, qualify for the higher mileage deduction. Any miles driven before July 1 must be deducted at the lower 58.5 cents deduction for mileage.
2021 Standard IRS Mileage Reimbursement Rate
The IRS sets the mileage deduction rate in late in the previous year, so the original mileage rate for 2022 did not include the higher gas prices that occurred during 2022.
The IRS rate per mile for business miles driven for business was 58.5 cents per mile, but for miles driven after July 1, 2022 it will be 62.5 cents per mile.
The IRS standard mileage rate for medical purposes, or for miles driven while moving is 18 cents per mile for the first half of 2022, and is 22 cents per mile for miles driven in the second half of the year.
The mileage deduction rate for miles driven for charity is still 14 cents per mile for all of 2022.
Standard Mileage Rate Amount Tax Deduction
Remember, you may only deduct miles driven for business purposes that are not reimbursed by your employer. Although your employer is not required to use the IRS standard deduction per mile, most companies do for easier compliance. Also, remember that miles you drive commuting back and forth from your job are not tax deductible at all. However, if you are a 1099 employee (contract, non-W2 employee) you may be eligible to deduct such mileage as a business expense.
The IRS standard mileage rate for miles driven in service of charitable organizations is 14 cents per mile for 2021 and 2020. Again, if you are reimbursed in anyway, you may not deduct your mileage. However, if you drive in order to do something for a charitable organization, it can be deducted, essentially as a donation to the organization. The standard rules for who does, and does not, count as a charitable organization apply.
Finally, you can deduct 16 cents per mile for mileage driven for medical or moving purposes. The rules for deducting medical expenses and moving expenses apply. So, determine whether you qualify for the deduction category first, before worrying about the miles. In both cases, there is a not insignificant minimum floor of expenses required before you are entitled to any deduction, so driving your kids to the pediatrician once per year probably won’t be big enough to get deducted.
2022 Standard Mileage Rate
Beginning with miles driven on January 1, 2022 and through June 30, 2022, taxpayers must use the 2022 standard mileage rates
- 58.5 cents per mile for business use
- 18 cents per mile for medical purposes
- 14 cents per mile for miles driven for charitable purposes
After July 1, 2022 the rates become 62.5 cents per mile, 22 cents per mile, and 14 cents per mile, respectively.
How To Deduct Mileage Using the Standard Mileage Deduction Amount
Once you have determined that your driven miles are deductible, you’ll need to keep records of all deductible miles driven. The IRS requires “contemporaneous records,” which means you need to somehow log your mileage deduction miles driven as you drive them. The best practice is to log each trip with a date, purpose, starting point and destination, and starting and ending odometer reading, although that isn’t strictly necessary. Some people keep a little mileage deduction logbook in their car. Others use an app on their phone.
Whatever you use, be sure that you can export the data and keep it with your tax papers for the next three years. Don’t make the mistake of assuming you can get back into an app or online log three years from now.
Deducting Miles Driven Without the Standard Mileage Rate
Of course, you do not have to use the standard mileage deduction rate. You may deduct the actual cost of operating your vehicle for business, charity, medical, or moving purposes. However, this requires detailed records, and receipts for things like vehicle maintenance such as oil changes and repairs.
Also, if you deduct the cost of a vehicle using a Section 179 deduction or with the Modified Accelerated Cost Recovery System (MACRS), you may not use the standard mileage deduction amount for 2021, 2022, or any year as a deduction.
Deducting Miles on Your Income Taxes
It turns out that the standard mileage rate deduction is a good deal for most drivers. The mileage rate includes wear and tear on the vehicle as well as some depreciation. While those are real expenses that will eventually catch up to taxpayers, in the meantime, it is like more money than most drivers spend in cash on driving for business. The standard mileage rate deduction is an even better deal for drivers of fuel efficient vehicles since the IRS mileage rate is the same for all drivers. Drivers of well maintained cars that get high gas mileage can even make money on the mileage deduction.
About the Author
By Brian Nelson – Brian is a former Certified Financial Planner and financial advisor. He writes for the Finance Gourmet and other financial publications. The material provided on this website is for informational use only and is not intended as individual financial or tax advice. ArcticLlama, LLC, FinanceGourmet.com, and Brian Nelson, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please note that material may not be updated regularly and that some of the information may not be current. Consult with your own tax professional when making decisions regarding your tax situation.