The IRS announced that the business standard mileage rate for transportation expenses paid or incurred beginning January 1, 2023, will be 65.5 cents per mile, up 3 cents from the second half of 2022 [Notice 2023-03, 12-29-22].
In addition, the 2023 standard rate for miles driven for medical or moving purposes will be 22 cents per mile, which is unchanged from the rate in effect during the second half of 2022. Note: For tax years 2018 through 2025, the deduction for moving expenses only applies to members of the Armed Forces on active duty who move under a military order and due to a permanent change of station.
The standard mileage rate for operating a passenger car for charitable purposes, which is set by law, will stay at 14 cents per mile in 2023.
Vehicles Put Into Service in 2023
For vehicles put into service in 2023, the cents-per-mile valuation method can be used only if the vehicle does not have a fair market value of more than $60,800 ($56,100 in 2022). For employer-provided vehicles under the fleet-average valuation rule, applicable to an employer with a fleet of 20 or more automobiles, the 2023 maximum value is $60,800 for an automobile ($56,100 in 2022). Note: The fleet-average valuation rule may not be used if any of the automobiles in the employer's fleet exceeds its maximum allowable value.
Make Sure to Use the Correct Rate
Because of the 3-cent increase in the business standard mileage rate, employers reimbursing employees at the rate for the second half of 2022 need to be mindful of the rate change. Employers should make sure they change to the 2023 rate for all affected travel on or after January 1, 2023. And remember that business miles driven in December 2022 that show up on an employee’s expense report in 2023 are governed by the rules applicable to the corresponding 2022 mileage rate for the second half of 2022.
To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!Curtis E. Tatum, Esq., is In-House Counsel and Director of Federal Payroll Compliance for the APA.
