If you’re self-employed or own a small business, you may soon be eligible for a little relief from soaring gas prices.
Starting on July 1, the standard mileage rate — used to deduct eligible business trips in a vehicle on tax returns — increases by 4 cents to 62.5 cents per mile, according to the IRS. The new rate applies to trips during the second half of 2022.
The rate for medical trips or active-duty military moving will also increase by 4 cents, allowing eligible filers to claim 22 cents per mile. But the rate for charitable organizations remains unchanged at 14 cents.
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“The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices,” IRS Commissioner Chuck Rettig said in a statement.
The change comes as gas prices continue to hit records, swelling to more than $5 per gallon nationally, sparked by an increased demand and shortages partially caused by the war in Ukraine.
Annual inflation grew by 8.6% in May, the highest increase since December 1981, according to the U.S. Bureau of Labor Statistics, with surging fuel costs significantly contributing to the gain.
Midyear mileage changes are ‘unusual’
“It is unusual for the IRS to have a midyear change in the standard mileage rate,” said certified financial planner Tricia Rosen, principal at Access Financial Planning in Andover, Massachusetts.
There’s only been a half-yearly shift three times since 2008, she explained, with the most recent one in 2011. Each one happened after a spike in gas prices, she said.
To claim the deduction, keep good driving records
While it’s always important to track mileage, including travel dates, it will be even more critical in 2022 to make sure the correct rates apply to each trip, Rosen said.
The standard mileage rate isn’t mandatory, according to the IRS. Taxpayers also have the option to calculate actual costs, which involves deducting a percentage of the vehicles’ total expenses. But either way, you’ll need detailed record-keeping.
“The IRS wants to see a logbook of business, medical and personal miles in order to prove that you are entitled to the deduction,” said Laurette Dearden, a CFP and CPA at the firm in her name in Laurel, Maryland.
You’ll need to show the beginning and ending mileage, the business or medical purpose for the trip and the date in your logbook. But realistically, very few people keep these kinds of records, she said.
However, you can use mobile apps to automatically track mileage, which may make it easier at tax time, she suggests.