When the IRS noticed that gas prices across the country went beyond, $5.00 a gallon, it took action.  Small businesses that use the standard mileage rate can now deduct 62.5 cents per business mile from July 1 through December 31, 2022.  This means additional 4 cents a mile from 58.5.

The next question is:  what to do if business mileage is tracked using the three-month sample method?

The Three-Month Test

Here are the basics of how the three-month test is described by the IRS:

  • The taxpayer uses the vehicle for business use.
  • The taxpayer and other members of the family use the vehicle for personal use.
  • The taxpayer keeps a mileage log for the first three months of the taxable year, showing that the vehicle is used 75 percent of the time for business.
  • Invoices and paid bills show that the vehicle use is about the same throughout the year.

IRS regulation says that a three-month sample similar to the one above is adequate for a taxpayer to prove 75 percent business use.

Applying the Sample Method to the New July 1 Mileage Rate

In using the sample rate, a taxpayer needs to prove that vehicle use is about the same throughout the year.  Invoices and paid bills can prove the mileage part, and an appointment book can add creditability to consistent business and personal use.

The sample is just that, a sample.  It may be exact for the three months, but not that exact for the year although it must adequately reflect the business mileage for the year.

If the three-month sample is good, the business mileage for the year can be taken and apply the 58.5 cents to half the mileage, and the 62.5 cents to the remaining half to come up with the deductions.

For example, if the taxpayer drove 20,000 business miles for the year, the deduction would be $12,100 (10,000 x 58.5 cents + 10,000 x 62.5 cents).

Other Mileage Concerns

If a taxpayer has a mileage record for the entire year, the record gives the mileage for the first six months (x 58.5) and the last six months (x 62.5).

The IRS also increased the standard mileage rate for medical and moving mileage from 18 to 22 cents from July 1 through December 31, 2022.

The IRS should be given credit since it responded to the increased gas prices.  Unfortunately, the charitable rate is under Congress, and Congress has not updated the charity rate for many years.  The charitable mileage rate remains at 14 cents a mile.

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