The rare midyear change to the IRS standard mileage rate in 2022 didn’t stop all the standard mileage rates used to calculate the deductible costs of operating a vehicle from going up for 2023. So it’ll cost your company a little more to reimburse employees’ vehicle travel this year.
The Service announced that as of Jan. 1, 2023, the optional standard mileage rates for the use of a car, van, pickup or panel truck will be:
- 65.5 cents per mile for business use – up 3 cents from the midyear increase
- 22 cents per mile for deductible medical expenses or moving purposes for qualified active-duty members of the armed forces – the same as the 2022 midyear rate, and
- 14 cents per mile driven in service of charitable organizations, a rate which remains set by law.
What to note if you have company vehicles
With all the talk about Inflation Reduction Act tax cuts for electric vehicles, you may be wondering if these rates apply to electric and hybrid-electric cars. They do, IRS said.
Taxpayers must use the standard mileage rate in the first year a vehicle is available for business use. Then in subsequent years, either the standard mileage rate or actual vehicle operating expenses can be applied for deductions.
Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.
Check out IRS Notice 2023-03 for info on the maximum cost used to calculate the allowance under a fixed and variable rate plan.
The notice also provides the maximum fair market value of fringe-benefit, employer-provided vehicles that are first made available to employees for personal use in 2023, for which employers may use the fleet-average valuation rule (which involves the IRS Annual Lease Value Table), or the vehicle cents-per-mile valuation rule (multiply the standard mileage rate by the number of miles the worker’s driven in the company vehicle for personal reasons).
Spread the word about the new mileage rate
A new standard business mileage rate can mean potential reimbursement errors in the new year if employees turn in expense reports using an outdated rate. So A/P needs to remind them to double-check their figures before submitting reports.
It’s also important to communicate the business mileage rate change to your people ASAP, and update all references to the rate in your company’s written policies, handbook, intranet, etc.
A/P also needs to be on the lookout for any mileage expenses that seem unnecessarily high in expense reports. Some employees may try to offset travel costs by inflating their mileage, so be sure to tell your A/P folks to question any reports that look inaccurate.
