IRS issues 2023 standard mileage rates

During the last week of 2022, the Internal Revenue Service issued an adjustment to the 2023 optional standard mileage rates. 

Beginning January 1, 2023, the standard mileage rate is now 65.5 cents per mile for business use, marking an increase of 3 cents from the second half of 2022. 

Background

The optional standard mileage rates are used to determine the “deductible costs of operating an automobile for business, charitable, medical, or moving purposes.” The rate applies to cars, vans, pickups, panel trucks, and includes both electric or hybrid-electric vehicles and gasoline or diesel-powered vehicles. The rates each year vary depending on if the mileage is for business use, medical or moving purposes, or in service of a charitable organization.

Typically, the standard mileage rate is updated once a year, though there are rarities such as 2022’s midyear adjustment in response to surging gas prices. The increase each year for business use is based off an annual study (conducted by an independent contractor) of the fixed and variable costs of operating a vehicle. For medical or moving purposes, the rate is based on the variable costs. For charitable organizations, the amount is set by statute.

2023 Mileage Rates

• 65.5 cents per mile driven for business use
• 22 cents per mile driven for medical or moving purposes (moving purposes apply only to qualified active-duty military members)
• 14 cents per mile driven for charitable organizations, unchanged from 2022 as it is set by statute

Important to note: Under the Tax Cuts and Jobs Act (TCJA) of 2017, the standard mileage rate cannot be used to claim a miscellaneous itemized deduction for any unreimbursed employee travel expenses.

Optional Rate for Business Use

While the standard mileage rate for business use has been adjusted, it is important to note that taxpayers may also opt to calculate the actual costs of operating their vehicle instead. 

Any taxpayer who wishes to do so should maintain adequate records or other sufficient evidence of costs incurred. In most cases, taxpayers must use the standard mileage rate the first year a car is used for business, but in later years, they may choose between the standard mileage rate or actual expenses. In the case of leased vehicles, the standard mileage rate must be used for the life of the lease (and any renewals) if the standard mileage rate is chosen. Also, see our earlier blog, Tax Considerations For Vehicle Operation In Inflationary Times for more information regarding the business use of a vehicle. 

For any questions or concerns, please reach out to your trusted Herbein advisor using the form below.

Article contributed by Paige Famous