IRS Increases Standard Mileage Rate for Remainder of 2022
As of July 1, the standard mileage rate used to deduct eligible business trips in a vehicle on tax returns increased by 4 cents, to 62.5 cents per mile. And the new rate for mileage to and from medical treatment for residents is 22 cents. These new rates apply to trips during the second half of 2022.
The IRS normally makes updates in mileage rates once a year in the fall for the following calendar year. However, given the historically high cost of gas in the past several months, the IRS wanted to take steps help those who use this rate. These types of changes are rare. There’s been a mid-year shift only three times since 2008, and the last mid-year rate increase occurred in 2011. Each change happened after a spike in gas prices. “The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices,” IRS Commissioner Chuck Rettig said in a statement.
Business Driving Expense Deductions
The mileage rate includes other items in its calculation such as depreciation and insurance and other fixed and variable costs. This optional business standard milage rate is used by many businesses to calculate deductible costs of operating a vehicle for business use in lieu of tracking actually costs.
For example, for income certification purposes, these updated rates are considered when calculating net income from some businesses such as ride-hailing and app-based delivery services. For residents or applicants who may spend time behind the wheel of their car earning money with these apps, they are considered self-employed and their income can be sporadic and dependent on the rates prescribed by the app. For these individuals, transportation costs are deductible as business operating expenses.
These residents have two options for deducting vehicle expenses. They can use the IRS standard mileage rate, or they can deduct their actual expenses for gas, depreciation, and other driving costs. Most people use the standard mileage rate because it’s simpler and requires less recordkeeping. By using this option, one needs to keep track of only how many business miles driven and not the actual expenses of their car, such as the amount paid for gas.
To figure out the deduction, the resident multiplies business miles driven by the applicable standard mileage rate. Then, the deduction is applied to the driver’s gross income. If the resident chooses the standard mileage rate, he can’t deduct actual car operating expenses such as maintenance and repairs, gasoline and its taxes, oil, insurance, and vehicle registration fees. All of these items are factored into the rate set by the IRS. And you can’t deduct the cost of the car through depreciation because the car’s depreciation is also factored into the standard mileage rate, as are lease payments for a leased car.
The resident must use the standard mileage rate in the first year that he uses a car for business, or he is forever prevented from using that method for that car. If he uses the standard mileage rate the first year, he can switch to the actual expense method in a later year, and then switch back and forth between the two methods after that. However, this rule doesn’t apply to leased cars. If your resident leases his car, he must use the standard mileage rate for the entire lease period if he used this option in the first year.
Medical Expense Deductions
Some of your households may have unreimbursed medical expenses that include travel expenses to and from treatment. And if any of these households are classified as elderly or disabled, HUD permits a medical expense deduction to be used to calculate their adjusted annual income. These households can include mileage to and from medical appointments and to and from regular medical treatments as part of the medical expense deduction.
When calculating the medical expense deduction, the actual cost of traveling to and from treatment is used. This can be bus or taxi fare or, if driving a car, a mileage rate based on IRS rules. So, when calculating the medical expense deduction for mileage to and from medical treatments or appointments, be sure to use the new mileage rates.
From January through June 2022, the standard mileage rate was 18 cents per mile for use of an automobile for medical care. The new rate for deductible medical expenses is 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. This means that the expense increases $4.00 for every 100 miles driven.