How Will You Deal with the New 62.5 Cents Mileage Rate?

By
Industry Observer with Green Krist CPA PLLC 34463

The IRS noticed that average gas prices across the United States exceeded $5.00 a gallon and took action.

Small businesses that qualify to use and do use the standard mileage rate can deduct 62.5 cents per business mile from July 1 through December 31, 2022. That’s up 4 cents a mile.

This brings up a practical question: what do you do if you track business mileage using the three-month sample method?

Three-Month Sample Basics

As a reminder, here are the basics of how the IRS describes the three-month test:

  • The taxpayer uses her vehicle for business use.
  • She and other members of her family use the vehicle for personal use.
  • The taxpayer keeps a mileage log for the first three months of the taxable year, showing that she uses the vehicle 75 percent of the time for business.
  • Invoices and paid bills show that her vehicle use is about the same throughout the year.

According to this IRS regulation, her three-month sample is adequate for this taxpayer to prove her 75 percent business use.

Sample-Method Solution to New July 1 Mileage Rate

To use the sample rate, you need to prove that your vehicle use is about the same throughout the year. Your invoices and paid bills prove the mileage part, and your appointment book can add creditability to consistent business and personal use.

Keep in mind that the sample is just that—a sample—it’s pretty exact for the three months but not that exact for the year, although it must adequately reflect the business mileage for the year.

If you have a good three-month sample, you take your business mileage for the year and apply the 58.5 cents to half the mileage and the 62.5 cents to the remaining half to find your deductions.

For example, say you drove 20,000 business miles for the year. Your deduction would be $12,100 (10,000 x 58.5 cents + 10,000 x 62.5 cents).

Mileage Record for the Full Year

If you have a mileage record for the entire year, no problem. Your record gives you the mileage for the first six months and the last six months.

Green Krist, CPA  specializes in assisting taxpayers with IRS and North Carolina Department of Revenue issues in the greater Raleigh, North Carolina area.

Comments (4)

Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great information.   Thanks for sharing and enjoy your day!

Jul 10, 2022 08:04 AM
Leanne Smith
Dirt Road Real Estate - Golden Valley, AZ
Relocation to NW AZ with elbow room & more freedom

As a small business owner for nearly 3 decades, I keep a written mileage log and all receipts.  I do not use an app because many of the travel mileage apps will show stop offs such as on the way back from a showing you stop at the grocery store.  Your mileage from the grocery store to home will be counted as personal. In this log I note property, client, etc.

 

Sometimes paper is still the best way to handle business operations.

 

Thanks for the update on mileage, I will put that in my travel/mileage log.

Jul 10, 2022 08:10 AM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
& Host of Postcards From Success Podcast

How Will You Deal with the New 62.5 Cents Mileage Rate?
Easy, 100% (bigger) deduction off my 100% work only vehicle. 😉 Wahooo!

Jul 10, 2022 08:19 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Miriam, only 4 cents I was hoping for a lot more from the IRS this year.  Thank you for the information.

 

Jul 10, 2022 08:49 AM