Inflation rates continue to rise due to continued Supply Chain Shortages and the price of everyday essential items including gasoline are skyrocketing – with many paying more than $5.00 per gallon.
The IRS has taken note of this and has increased the optional standard mileage rate by 4 cents per mile effective July 01, 2022. This raises the rate from 58.5 cents to 62.5 cents per mile. This midyear adjustment is rare – typically the adjustment is made annually and the last time a midyear adjustment to the rate was made was 2011. The IRS has also raised the rate for deductible medical or moving expenses (a rate that is only available for active-duty military) by 4 cents bringing the new rate from 18 cents to 22 cents per mile. This change in rate however does not affect the 14 cents per mile rate for charitable organizations as this is set by statute.
First, it’s helpful to know a little background about this rate. The standard mileage rate is a national average rate, which considers a variety of factors including fuel costs, depreciation, and insurance as well as other fixed and variable costs.
So, what does this increase mean for you? This means that if you were previously using this rate to compute the deductible costs of operating your vehicle for business use in lieu of tracking actual costs or your employer was reimbursing you for mileage, that beginning July 01, 2022, the rate that you or your employer uses for this will be increasing. In addition, if you are an active-duty military member, you will also see an increased rate for your medical and moving expenses.
Please note that the change means individuals that use the standard mileage rate now need to track miles before July 1 and those miles after June 30. Davis & Hodgdon clients will be asked to break their mileage down accordingly when preparing their 2022 tax returns.
With offices in Williston and Rutland Vermont, Davis & Hodgdon CPAs has been assisting Vermont’s residents and entrepreneurs for more than 30 years. Our proactive approach makes us more than an accounting firm – we counsel our clients on a wide range of financial and management issues, resulting in better decision making and more confidence in their success. Click here to contact us today and find out how we can help you!
Article authored by Michael Hamilton, Associate Accountant