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February 2023: The IRS Standard Mileage Reimbursement Rates Rise for 2023

31 Jan

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Update Applicable to:
All employers with company vehicles.

What happened?
The Internal Revenue Service issued the 2023 optional standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

What are the details?
On January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) have been changed to:

  • 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
  • 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
  • 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.

These rates apply to electric and hybrid-electric automobiles and 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 variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers cannot claim a deduction for moving expenses unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details, see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. If the standard mileage rate is chosen, leased vehicles must use the standard mileage rate method for the entire lease period (including renewals).

Notice 2023-03 contains the optional 2023 standard mileage rates and the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in the calendar year 2023, for which employers may use the fleet-average valuation rule or the vehicle cents-per-mile valuation rule.

For more information, please see the links below:

Notice 2023-03

Moving Expenses for Members of the Armed Forces

IRS News Release

Article

What do employers need to do?
Employers should carefully review the links provided above so that they are aware of the exact changes to the rates for mileage reimbursements.

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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