New Changes to the IRS Mileage Rates for 2023
Early this year, the Internal Revenue Service issued its updated standard mileage rates for 2023. These are used for calculating deductions on costs related to operating a vehicle for business, charity, medical or moving purposes.
Updates to the standard mileage rates for 2023
Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.
These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
Every year, the usual mileage rate for business use is determined by an examination of both fixed and variable costs related to operating a vehicle. The medical and moving rates are based on those estimated variable expenses associated with these activities.
It is pertinent for taxpayers to be aware of the fact that due to the Tax Cuts and Jobs Act, claiming any miscellaneous itemized deductions related to unreimbursed employee travel expenses or moving expenses (unless they are members of active duty Armed Forces moving under orders to a permanent change of station) will not be possible.
When you choose to use the standard mileage rate, you must typically select it in the first year that your car is available for business purposes. Afterward, each tax season will offer a decision between either using the standard mileage rate again or opting for actual expenses instead. If you currently lease a vehicle and would like to utilize this method of taxation, then the selection of the standard mileage rate should be kept consistent throughout your duration with that leased asset (including any renewal periods).
The 2023-03 notice encompasses the existing optional standard mileage rates for 2023, as well as the maximum auto cost used to determine an allowance under a fixed and variable rate (FAVR) plan. Moreover, this notice establishes the highest fair market value of employer automobiles which are first accessible to employees for individual use in the calendar year 2023. Employers may utilize either the fleet-average valuation rule or the vehicle cents-per-mile valuation rule when doing so.
If you have any questions about the new changes to the IRS standard mileage rates for you and your business or any accounting questions in general, please feel free to contact us.
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