Dealing With The New 62.5 Cents Mileage Rate

Due to rising gas prices, the Internal Revenue Service (IRS) announced an increase in the standard mileage rate for business travel. As a result, small businesses that make use of the standard mile rates can deduct 62.5 cents per mile for business mileage. 

This is effective from July 1 to December 31, 2022. It is a 4-cent increase from 58.5 cents, which was the rate at the beginning of the year. 

So, how do you calculate your business mileage deduction with these changes? 

Three-Month Sample Basics 

Basics of the three-month test: 

  • The taxpayer must use their vehicle for business use. 
  • The taxpayer and their family use the vehicle for personal use. 
  • The taxpayer keeps a mileage log for the first three months showing they use the vehicle 75 percent of the time for business. 
  • Can produce receipts of paid bills and invoices showing that the vehicle use is about the same throughout the year. 

Per the IRS regulation, the three-month sample is sufficient to for this taxpayer to prove their 75 percent business use.  

How The IRS Calculates the Three-Month Sample

While you use the vehicle for business purposes, you and your family also use it for personal use. You must keep a mileage log to record all your trips and destinations. Let’s say, from the mileage log of the first three months of the year, it is seen that your business use is 75% of the time. Your bills and invoices must show the same use throughout the year. 

Therefore, the three-month sample can be used to prove a business mileage of 75%. 

It is important for you to note that although the sample is exact for three months, it is not exact for the entire year. Therefore, you must prove that it can be used to calculate the business mileage rate for the year.  

Using The Sample Method For The New Mileage Rate 

If your three-month sample is accurate, you can use it to calculate your business mileage deduction for the whole year. All you have to do is apply the old rate of 58.5 cents to half of the mileage, and 62.5 cents to the second half. 

For example, based on your three-month sample, you drove a total of 30,000 miles for business for the year. This will give you a deduction of $18,150 (15,000 × 58.5 cents + 15,000 × 62.5 cents). 

What If I Have a Mileage Record for The Whole Year? 

If you kept a mileage record for the entire year, then there is no problem. In fact, this is the what the IRS prefers. You would have to kept track of every mile you traveled each day for business and personal use. 

Medical and Moving Mileage Rate 

In addition to the mileage rates for business travel, the rate of medical and moving travel also 

increased. The standard mileage rate for medical and moving travel is now 22 cents per mile. This is 4 cents increase from the old rate of 18 cents per mile. 

Charitable Mileage Rate 

It is the duty of the IRS to update the standard mileage rates for business, medical, and moving travel. In response to the high gas prices, the IRS increased the mileage rates. 

However, Congress is in charge of updating the charitable standard mileage rate. But they have made no changes to the mileage rate for charitable purposes despite the gas prices. It remains unchanged and stays at 14 cents per mile. 

Summary of the Changes in Mileage Rates for 2022 
Purpose  January – June  July – December 
Business  58.5  62.5 
Medical or Moving  18  22 
Charitable  14  14 

If you’d like further guidance with this new change, feel free to call us at 281-440-6279 and speak with one of our tax advisors. We love to educate our clients about tax laws and keep you up to date on how to save the most money on your taxes. 

The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

Should I Open an HSA?

Should I Open An HSA Account? Are you considering a Health Savings Account (HSA)? If so, it is vital to understand what exactly an HSA entails. With this guide, you'll learn all about it: the advantages of an HSA and how it can help you manage your medical expenses....

Personal Finance Tips for Young Adults

As someone who has been working for most of their life, I wish there was someone out there who had shown me the correct way to save money for my future. Now that I am in my 30s, I have been getting better at saving money, but there are some personal finance tips that...

How to Track Expenses

There are many different methodologies, tools, tips, and tricks for tracking expenses, and it ultimately depends on your lifestyle and how actively and accurately you want to track them. This is information I’ve pulled from other sources and compiled into a few...

How To Accurately Record Commuting Mileage and Increase Tax Deductions

Increase Tax Deductions With the Business-Mileage Rule Using the Business Mileage tax deduction can be tricky. There are lots of situations that count while others do not. We don’t like commuting mileage. You should dislike it, too. It’s personal. It’s not deductible....

Bookkeeping 101

As a new business owner, you will certainly have some responsibilities you won’t be able to avoid. One of those non-negotiable part of your business is producing financial statements. It can be overwhelming trying to master a topic such as bookkeeping but don’t worry...

Bankruptcy – Everything You Need to Know

Everything you need to know Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. Filing for bankruptcy will also put a halt to foreclosure or legal actions against you, and it stops creditors from calling and...

Top Tax Tips for 2023

Tax Refunds May Be Smaller This Year Plan now to learn these 2023 tax tips avoid surprises in the future! If you’re expecting a tax refund in 2023, it may be smaller than last year, according to the IRS. Your annual balance is based on taxable income, calculated by...

What is an EA?

Have you ever seen the title EA next to a tax professional’s name and wonder what it means? Or maybe you’re familiar with the title and you’re curious about the differences between an EA and CPA? Either way, in this blog I will be answering these frequently asked...

History of Federal Income Tax Rates: 1913 – 2021

The United States federal government levies taxes on the income of its citizens and legal residents. The Internal Revenue Service (IRS) is the agency responsible for collecting these taxes.  Federal income tax rates have changed several times since 1913, when the...

Familiarize Yourself With Tax Terminology

Yes, I know, tax terminology feels like a whole new language. For most people all of tax forms can be even more confusing than a foreign language. What’s the difference between itemized deduction and standard deduction? What’s Income tax?  These words and more tax...

Request an Appointment Today

2 + 3 =

Call us at

Pin It on Pinterest

Share This