Standard mileage rates will increase in 2022
After declining for two consecutive years, the rate at which taxpayers can calculate their deductions for the costs of operating an automobile for business purposes will increase to 58.5 cents per mile for the 2022 tax year, an increase of 2.5 cents per mile from 2021. rate.
Notice 2022-03, in which the IRS announced the update on Friday, also provides the standard mileage rate for using an automobile for the purpose of obtaining medical care under Sec. 213, which will be 18 cents per mile, up 2 cents from 2021. The rate of service to a charity remains the same, set by law at 14 cents per mile (Sec. 170 (i )).
The same rate as for medical care, 18 cents per mile, also applies to the deduction for moving and storage expenses under Sec. 217 (g) by members of the armed forces on active duty who move under a military order and following a change of permanent post.
Taxpayers can use the standard mileage rate for their use of an automobile as an ordinary and necessary business expense. Or they can claim the actual amount of authorized expenditure if they justify the expenditure, including by keeping adequate records or other sufficient evidence.
The Tax Reductions and Employment Act (TCJA), PL 115-97, suspended for the 2018 to 2025 tax years the various itemized deductions under Sec. 67 for unreimbursed business expenses of employees, including those incurred for the use of an automobile. However, the standard corporate mileage rate can still be used during this period as the maximum amount an employer can reimburse an employee for driving an automobile for business purposes without justifying the actual expenses incurred.
The portion of the standard business mileage rate that is treated as depreciation for the purposes of calculating base discounts will be 26 cents per mile for 2022, as for 2021.
Notice 2022-03 also provides for the maximum standard automobile cost under a Fixed Variable Rate Plan (FAVR) of $ 56,100 for automobiles (including trucks and vans), up $ 5,000. compared to 2021. Under an FAVR plan, a standard amount is deemed justified for reimbursement by the employer to employees of the expenses they incur to drive their vehicle in the course of providing services as an employee. employee for the employer. The same amount also applies to the maximum fair market value of automobiles (including trucks and vans) first made available during calendar year 2022 for the purposes of the average valuation rule. of the park in O. Reg. Second. 1.61-21 (d) (5) (v) and the cents per vehicle mile rule under O. Reg. Second. 1.61-21 (e).
Rates (other than for charitable mileage) are determined following an annual study by an independent contractor who analyzes the fixed and variable costs of operating an automobile, the notice says.
– To comment on this article or suggest an idea for another article, contact Paul Bonner at [email protected].