The IRS will increase mileage rates starting January 1. January 1, 2023. Photo: Al Drago/Bloomberg via Getty Images
The IRS increased the “optional standard mileage rate” used to calculate the 2023 tax deduction by 3 cents per mile.
big picture: The increase brings the IRS tax rate for business use to 65.5 cents per mile after two increases in 2022, the federal agency announced in a statement.
flashback: The IRS typically updates mileage rates annually, but in June announced a rare mid-year adjustment that went into effect on July 1 because of high gasoline prices.
- It was the first mid-year rate change since 2011, the agency said in June.
- The IRS says the standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating the car.
context: Taxpayers use the rate to calculate “deductible costs of operating a motor vehicle for business and certain other purposes,” rather than to track actual costs.
- It is also used by the federal government and many businesses as a benchmark for compensating employees for miles.
at the same time, The national average price for a gallon of regular unleaded gasoline was $3.179 on Friday, down from an all-time high of $5.016 set on June 14, according to the latest data from AAA.
Reality check: The IRS has lowered mileage rates after increasing them in the past, according to a chart on its website.
- The rate was last reduced by 1.5 cents in 2021 and then increased twice in 2022.
2023 IRS Mileage Rates
detail: The IRS reimbursement rate increased to 65.5 cents per mile.
- For active-duty military members, the tax rate for deductible medical or moving expenses is 22 cents, the same increase as in July 2022.
- The tax rate of 14 cents per mile for charities remains unchanged because it is mandated by statute, the IRS said.
Between the lines: The IRS said the rates “apply to electric and hybrid electric vehicles, as well as gasoline and diesel-powered vehicles.”
mileage tax deduction
or comment: “Under the Tax Cuts and Jobs Act, taxpayers cannot claim miscellaneous itemized deductions for unreimbursed employee travel expenses,” the IRS said.
- Taxpayers also have the option to calculate the actual cost of using the vehicle instead of using the standard mileage rate, the IRS said.
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