News

January, 2023

2023 Mileage Rates for Business Reimbursements

The IRS recently released the 2023 mileage rates for businesses to use as guidance when reimbursing workers for applicable miles driven within the year. The rates tend to increase yearly to account for rising fuel and vehicle and maintenance costs and insurance rate increases.

Businesses can use the standard mileage rate to calculate the deductible costs of operating qualified automobiles for business, charitable, medical, or moving purposes. Keep reading for the updated mileage rates and some reminders for mileage reimbursements and deductions.

Standard mileage rates for cars, vans, and pickups or panel trucks are as follows:

Use Category 

 

Mileage rate  

(as of Jan. 1, 2023) 

Change from the previous year 
Business miles driven  $0.655 per mile $0.03 increase from mid-year 2022
Medical or moving miles driven*  $0.22 per mile $0.00 increase from mid-year 2022
Miles driven for charitable organizations  $0.14 per mile

Note: Only congress may adjust the mileage rate for service to a charitable organization by a Congress-passed statute.

*Moving miles reimbursement for qualified active-duty members of the Armed Forces 

Important Reminders and Considerations 

When reimbursing employees for miles driven, keep the following in mind:

  • The Tax Cuts and Jobs Act (TCJA) prohibits employees from writing off unreimbursed business mileage. Companies that fail to make up for this reimbursement could face legal consequences.
  • Taxpayers using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or claiming a Section 179 deduction may not also use the business standard mileage rate for the same vehicle.
  • Taxpayers can calculate the actual costs of using their vehicle rather than accepting the standard mileage rates. Actual expense methods often provide different results than standard mileage. Talk with your CPA to determine the best method for you.
  • While the IRS standard mileage rate helps hold businesses accountable, it does not account for fluctuations in vehicle-related expenses in different regions of the country.
  • The Fixed and Variable Rate (FAVR) allowance is an alternate method for businesses whose employees use their vehicles for work. This method can help businesses avoid over-or underpaying employees for using their vehicles for business purposes.
  • Mileage reimbursement rates apply to gasoline, diesel-powered, electric, and hybrid-electric vehicles.

To review your organization’s mileage reimbursement policy and any alternate methods for calculating appropriate reimbursement amounts, reach out to our team of knowledgeable professionals today.

Author: FLSV

Similar news

Strategies for Managing Capital Gains

Navigating the realm of capital gains and optimizing tax outcomes require strategic thinking and informed decision-making. Understanding and employing effective capital gains tax strategies is crucial…

Read More
‘Master’ The Augusta Rule and Save Money on Your Taxes

Anyone who lives in a highly seasonal tourist destination knows you can make money on short-term rentals during events and festivities in your city or town.…

Read More
Reduce Your Taxes by Putting the Right Assets in Your IRA

Most people know the basic concept that certain types of investment accounts are tax sheltered while others are not. Think 401(k), 403(b), IRA and Roth IRA…

Read More

Contact Us

Garden City Office 1475 Franklin Avenue, Garden City, NY 11530 (516) 874-8800
West Palm Beach Office 777 S. Flagler Drive, East Tower, Suite 225
West Palm Beach, FL 33401
(561) 567-7900
Seattle Office Affiliated Office: Seattle, WA (206) 275-4600