The Internal Revenue Service (IRS) has increased the optional standard mileage rate for the final 6 months of 2022 to 62.5 cents per mile for business travel, an increase of 4 cents from 58.5 cents per mile for the first 6 months of 2022. The new rate becomes effective July 1, 2022.
This announcement, made on June 9, 2022, is an update on the standard mileage rates for conventional vehicles (cars, vans, pickups or panel trucks) per business mile driven. It has also updated the standard mileage rate for medical or moving miles driven to 22 cents per mile, an increase of 4 cents from the first half of the year. The rate for charitable service miles driven, which was set by Congress, remains 14 cents per mile for the rest of 2022.
While changing the standard mileage rate midyear is uncommon, it isn’t unprecedented, and under the current circumstances, was appropriate. This adjustment comes after months of skyrocketing gas prices spurred on by Russia’s continuing war in Ukraine. At the time the IRS made the announcement, the national average price of gas reached $5/gallon, according to GasBuddy. That’s over a dollar higher than the average price per gallon at the beginning of the year.
The IRS calculates standard mileage rates following an annual study of the costs associated with operating a vehicle. The mileage rates tend to follow the price of gas, but a variety of measurements are weighed to determine the cost of owning and operating a vehicle. In fact, a CompanyMileage analysis found that fuel accounts for about 30% of overall vehicle cost. Insurance accounted for 12%; licenses, registration and taxes for 7%; and tires and maintenance 3% each. The biggest factor in our vehicle cost analysis, depreciation, represented 45% of the overall cost.
According to our analysis, if the cost of gasoline is $5/gallon, the standard mileage rate should actually be closer to 67 cents per business mile. Nonetheless, the IRS’ decision to increase the rate to 62.5 cents per mile will help to alleviate some of the burden for workers who must drive their vehicles for work. Even small changes in the standard mileage rate can represent a substantial difference at the end of the year. For an employee reimbursed at the new IRS rate for driving 10,000 miles a year, the 4 cent adjustment means $400 more in their pocket.
Now is the Time to Manage Your Miles
The updated mileage rates, with some major considerations, are optional to adopt. While businesses have the option of using a different methodology, many choose to use the IRS rate because it can be challenging to create a consistent method of calculating and tracking the cost of vehicle usage across a large fleet of mobile employees.
SureMileage by CompanyMileage addresses these issues by using a different approach to calculating mileage reimbursement. With SureMileage, employees report their starting and ending points, and the system calculates the most expedient driving route between them. The app then calculates the expenses to be reimbursed based on those predetermined rates. At no point will employees need to report odometer readings or maintain a mileage log. With SureMileage, your business will be able to significantly cut down on instances of inaccurate reporting and reimbursement fraud.
Features such as an integrated Address Book and on-the-fly rate changes make it easy for employees to input their miles, adjust rates based on the vehicle used and save new destinations for future use.
Don’t forget to communicate the new IRS mileage rates with your employees. To better manage your mileage reimbursement process, reach out to CompanyMileage today.