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The Internal Revenue Service will increase the mileage rate starting January 1, 2023. Photo: Al Drago/Bloomberg via Getty Images
The Internal Revenue Service has increased the “optional standard mileage rate” used to calculate the tax credit by 3 cents per mile in 2023.
Big picture: The rate increase will bring the IRS tax rate to 65.5 cents per mile for twice-done business in 2022, the federal agency said in a statement.
Flashback: The IRS typically updates mileage rates once a year, but in June it announced a rare mid-year adjustment effective July 1 due to higher gas prices.
- This was the first midyear adjustment in interest rates since 2011, the agency said in June.
- According to the IRS, standard mileage rates for businesses are based on an annual study of fixed and variable costs for automobiles.
context: Taxpayers use the rate to calculate “the deductible cost of driving a motor vehicle for business and certain other purposes,” rather than tracking actual costs.
- It is also used by the federal government and many companies as a benchmark for reimbursing employees for mileage.
in the meantime, The national average gasoline price per gallon of regular unleaded gasoline rose to $3.179 on Friday from a June 14 high of $5.016, according to AAA’s latest data.
Reality check: According to charts on the IRS website, the IRS has reduced mileage rates that have increased in the past.
- Interest rates will be cut by 1.5 cents in 2021 and raised twice in 2022.
2023 IRS Mileage Rate
detail: The IRS reimbursement rate has been increased to 65.5 cents per mile.
- For active duty military personnel, the deductible rate for medical or travel expenses is 22 cents, similar to the July 2022 price increase.
- According to the IRS, 14 cents per mile for charities has not changed as required by law.
Line spacing: The IRS says the tax rate “applies to electric and hybrid electric vehicles, as well as gasoline and diesel vehicles.”
Tax deduction for mileage
note: The IRS says, “Under the Tax Cuts and Jobs Act, taxpayers cannot claim other itemized deductions for unpaid employee travel expenses.”
- According to the IRS, taxpayers also have the option of calculating the actual cost of using a vehicle rather than using standard mileage rates.
Details from Axios:
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