The IRS has issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes. The standard mileage rate is often used by employers to calculate the amount to be reimbursed to employees for the mileage they drive for business purposes.
Beginning on January 1, 2023, the standard mileage reimbursement rates for the use of a personal car (also vans, pickups, or panel trucks), per Notice 2023-3, will be:
- 65.5 cents per mile (up from 62.5 cents per mile in July 2022) driven for business use;
- 22 cents per mile (no change from July 2022) driven for medical or moving purposes for qualified active-duty members of the Armed Forces; and
- 14 cents per mile driven in service of charitable organizations.
These mileage rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
The business mileage rate is based on an annual study of the fixed and variable costs of operating a vehicle. The medical and moving mileage rate is based on the variable costs. The charitable mileage rate is set by statute and remains unchanged.
It is important to note that under the Tax Cuts and Jobs Act, employees cannot claim an itemized deduction for unreimbursed employee business expenses. Additionally, taxpayers generally cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details, see Moving Expenses for Members of the Armed Forces.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Code Sec. 179 deduction for that vehicle. Leased vehicles must use the standard mileage rate for the entire lease period (including renewals) if the standard mileage rate is chosen.
If you have questions about mileage reimbursement or any other tax matter that affects your business, S.J. Gorowitz Accounting & Tax Services is always available to help. Please contact us at any time for more information and assistance.