Reimbursements to Know About

As you may be aware, due to rising fuel costs the IRS recently announced the highest ever increase in the standard mileage rate, effective July 1, 2022 through December 31, 2022. The increase (cents per mile) is as follows:

PurposeRates 1/1 through 6/30/2022Rates 7/1 through 12/31/2022
Business58.562.5
Medical/Moving1822
Charitable1414

 
Employers must reimburse their employees for the business use of their personal assets (i.e., the employee’s vehicle) that are required for the performance of their jobs. The rates above are not necessarily just based on the cost of gas; it also includes vehicle depreciation (i.e., wear and tear), maintenance and repair costs, registration and car insurance. This optional rate is typically used by employers as an alternative to calculating the actual costs of such use. Employers can also use the lump-sum payment such as a car allowance or gas stipends to reimburse employees for this use. Additionally, per the Tax Cuts and Jobs Act, employees are prohibited from claiming miscellaneous itemized business expense deductions from 2018 through 2025, regardless of whether the employer reimburses employees for the use of their personal vehicles.

Mid-year changes like this are unusual – 2011 was the last time the IRS changed the mileage rate mid-year.