Each year, the IRS sets a new standard mileage reimbursement rate for tax purposes, and although the mileage rate will change with inflation, it should not be overlooked to consider the most current rate.
By definition, mileage rates are used to compute the deductible expenses of driving a car for business, medical moving, charity, or relocation purposes. Employers utilize these rates to reimburse employees for business miles the spending is considered substantiated.
While calculating mileage rates, various factors such as fuel prices, depreciation, insurance, as well as other fixed and variable expenses are taken into account. There are two ways to calculate a mileage deduction: you can choose the standard mileage rate or choose the actual expense method.
In addition to this, if you require your employees to use their personal vehicles for business, it’s important to understand mileage reimbursement rates. Understanding these rates and the Internal Revenue Services (IRS) mileage rate, in particular, ensures that your business is compliant with the law.
According to the Internal Revenue Service, an announcement published through its 2022-13 on June 9, 2022, reportedly increased the optional standard mileage rate from 58.5 cents per mile to 62.5 cents per mile for the last six months of 2022
It is important to note that, each taxpayer should be aware of the opportunity of calculating the actual cost of using their vehicle, rather than using standard mileage rates.
As mentioned above, it will be helpful for employers to calculate the mileage rate yearly. It should be necessary to indicate that each state has a different variable mileage rate. Here is the detail about the mileage rates of some states in the United States:
- Chicago: For journeys beginning on or after January 1, 2022, the mile reimbursement rate is 58.5 cents per mile.
- Texas: Texas State’s maximum mileage reimbursement rate for travel occurring on or after January 1, 2022, is 58.5 cents per mile.
- California: For 2022, the IRS and the California Department of Human Resources suggest mileage reimbursement rates( including petrol hybrid, electric, petrol, or diesel) of $0.585 per mile. They both increased the reimbursement rate by 2.5 cents from 202
- Florida: Beginning on January 1, 2022, the standard mileage rates for the use of a car (or a van, pickup, or panel truck) are: 58.5 cents per mile for business miles driven (including a 26-cent-per-mile allocation for depreciation). This is up from 56.0 cents in 2021; 18 cents per mile driven for medical care or by an active member of the armed forces for moving purposes. This is up from 16 cents in 2021, and 14 cents per mile driven in service of charitable organizations.