The IRS noticed that average gas prices across the United States exceeded $5.00 a gallon and took action. The information below was provided to us from Bradford Tax Institute.

 

Small businesses that qualify to use and do use the standard mileage rate can deduct 62.5 cents per business mile from July 1 through December 31, 2022. That’s up 4 cents a mile.

 

This brings up a practical question: what to do if you track business mileage using the three-month sample method?

 

Three-Month Sample Basics

 

As a reminder, here are the basics of how the IRS describes the three-month test:

 

• The taxpayer uses her vehicle for business use.

 

• She and other members of her family use the vehicle for personal use.

 

• The taxpayer keeps a mileage log for the first three months of the taxable year, showing that she uses the vehicle 75 percent of the time for business.

 

• Invoices and paid bills show that her vehicle use is about the same throughout the year.

 

According to this IRS regulation, her three-month sample is adequate for this taxpayer to prove her 75 percent business use. To see the word-for-word example in this regulation as the IRS writes it, click footnote 3 below.

 

Sample Method Solution to New July 1 Mileage Rate

 

To use the sample rate, you need to prove that your vehicle use is about the same throughout the year. Your invoices and paid bills prove the mileage part, and your appointment book can add creditability to consistent business and personal use.

 

Keep in mind that the sample is just that—a sample—it’s pretty exact for the three months but not that exact for the year, although it must adequately reflect the business mileage for the year.

 

If you have a good three-month sample, you take your business mileage for the year and apply the 58.5 cents to half the mileage and the 62.5 cents to the remaining half to find your deductions.

 

For example, say you drove 20,000 business miles for the year. Your deduction would be $12,100 (10,000 x 58.5 cents + 10,000 x 62.5 cents).

 

Mileage Record for the Full Year If you have a mileage record for the entire year, no problem. Your record gives you the mileage for the first six months and the last six months.

 

Mileage Record for the Full Year

 

If you have a mileage record for the entire year, no problem. Your record gives you the mileage for the first six months and the last six months.

 

Medical and Moving Mileage Rate Increases

 

The IRS also increased the standard mileage rate for medical and moving mileage from 18 to 22 cents from July 1 through December 31, 2022.

 

Charitable Mileage Suffers an Ugly Fate

 

The IRS is in charge of updating the standard mileage rates for business, medical, and moving mileage. Note that the IRS responded to the increased gas prices. Give the IRS credit.

 

But guess who’s in charge of the charitable rate? Guess why it suffers an ugly fate? Congress. Yep, Congress has not updated the charity rate—not only for this year—but for far too many years.

 

The charitable mileage rate remains at 14 cents a mile.

 

Summary of Mileage Rate Changes

 

Mileage Purpose 1/1 – 6/30/22 | 7/1 – 12/31/22

Business                  58.5               62.5

Medical/Moving          18                   22

Charitable                 14                    14

 

 

July 19, 2022 | DWHuff Consulting

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