A few new points for small business owners to note for the start of this new year.
New year. New Internal Revenue Service (IRS) optional standard mileage rates for 2023.
The IRS recently announced new mileage rates for computing the deductible cost of operating an automobile for business, charitable, medical, or moving purposes which notably includes a three-cent per mile increase for businesses.
These new rates went into effect Jan. 1, including the following specifics:
65.5 cents per mile driven for business use, up from 62.5 cents for business transportation.
The rate for medical or moving purposes in 2023 will remain at 22 cents per mile.
The rate per mile driven in service of charitable organizations remains unchanged from 2022 at 14 cents.
Rates are applicable to electric and hybrid-electric vehicles, as well as gas and diesel-powered automobiles.
For some context on why these changes occurred, mileage rates for businesses are calculated according to an annual study of the costs of operating a car; whereas variable cost set the rate for medical and moving purposes.
Employers that reimburse employees for business transport based on mileage should note this increase in mileage rates, with a reminder that any payments to an employee based on business travel at a rate more than the IRS standard rate generally is taxable income to the employee. There is no legal requirement that employees be reimbursed at the IRS standard rate, many employers have a policy of doing so.
Follow NSBA as we track tax policy in this Congress and their policies effects on our small business community.