The Federal Mileage Rate is a set rate of money that the IRS reimburses taxpayers for using transportation for business operations, charity, moving, or even medical purposes. Specific rates for each vehicle and purpose are routinely updated to account for inflation and factors such as fuel, insurance, licensing, and vehicle maintenance costs.
What is the Federal Mileage Rate in 2022?
Based on the average fixed and variable costs of operating a vehicle in the United States, the Internal Revenue Service (IRS) sets the mileage rate. They factor in things like maintenance costs and fuel expenses.
Currently, the mileage rate set by the IRS is as follows:
For business purposes: 58.5 cents
For medical purposes: 18 cents
For relocation purposes: 18 cents
For charitable purposes: 14 cents
Do Employers Reimburse Employees' Mileage?
Even though it is not mandatory and required by law for employers to reimburse employees for business-related travel expenses, it is a common practice for them to do so.
Moreover, they may reimburse employees at a rate lower than the Federal Mileage Rate. Still, they need to ensure that whatever rate they provide, when adjusted, doesn't cause the employee's wage to be less than the minimum wage.
On the other hand, employees need to provide employers with details like date, time, purpose, and place. Furthermore, they must return any extra reimbursement they receive to the employers.
Calculating Mileage Rates and Expenses
As an employer, your driving expenses can be calculated in the simplest way possible by multiplying the total number of miles driven for business by the per-mile rate established by the Internal Revenue Service. Nevertheless, you must keep track of the mileage associated with your business.
The regulations regarding business mileage deductions might be challenging to understand, mainly if you operate a large number of vehicles for your company, have recently purchased a new vehicle, or leased the vehicle in question. More information can be found on the website of IRS.
What are Things Covered by the Federal Mileage Rate?
The Federal Mileage Rate or IRS Mileage Rate covers the following expenses:
Fuel for the vehicle
Maintenance costs for the vehicle
Insurance for the vehicle
Lease for the vehicle
However, it does not cover the following:
Fees for parking the vehicle
Company transport expenses
Using the vehicle for personal errands
Can Self-Employed Individuals Claim Federal Mileage Rate Reimbursements? How?
If you are self-employed and use your vehicle for business purposes, you can receive mileage reimbursement on your annual tax return. When filing your mileage claim with the IRS, you must calculate the mileage rate that is in effect for the year in which you are filing the claim. For example, if you are claiming mileage for your expenses in 2021 now (in 2022), then you need to calculate it at the rate at the time of the expenditure, which is 2021.