The Internal Revenue Service issued the 2023 optional standard mileage rates today for computing the deductible cost of operating an automobile for business, charitable, medical, or moving purposes. The most notable change is the three-cent per mile increase for businesses.
Effective January 1, 2023, the optional 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. This is a three-cent increase from the midyear increase which set the rate for the second half of 2022.
- The rate for medical or moving purposes in 2023 will remain at 22 cents per mile.
- The rate per mile driven in service of charitable organizations remains unchanged from 2022 at 14 cents.
These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
These mileage rates apply only to those expenses incurred or paid by a taxpayer on or after January 1, 2023 (and if reimbursed by an employer on or after that date). Expenses incurred prior to January 1, 2023 (whether reimbursed by the employer before or after that date) are still subject to the 2022 midyear increase rates (62.5 cents for business transportation, and 22 cents for medical transportation).
This increase in mileage rates is relevant to employers that reimburse employees for business transportation based on mileage. While there is no legal requirement that employees be reimbursed at the IRS standard rate, many employers have a policy of doing so. As a reminder, any payments to an employee based on business travel at a rate more than the IRS standard rate generally is taxable income to the employee.
If you have questions regarding the above, please contact Mary Ellen Schill, the author of this article, or any of the attorneys in the Employment & Benefits Practice Group of Ruder Ware.
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