While the 2023 IRS standard business mileage rate hasn’t yet been announced, it’s certainly worth discussing what the rate might be, how it might affect you or your business, and where the IRS standard mileage rate comes from. Using the last few years as precedent, the IRS will likely announce next year’s standard mileage rate in mid-December 2022.
What Does the IRS Standard Mileage Rate Refer To?
The IRS standard mileage rate is a recommended reimbursement rate for companies for their employees who use their personal vehicles to conduct business on behalf of their employer. For example, if a business chooses to use 2022’s mileage rate, they will reimburse their employee 62.5 ($0.625) cents per mile driven in their personal vehicle for business use.
This figure changes yearly and is based on the fixed and variable costs of owning and operating a motor vehicle. Things like gas, oil changes, vehicle depreciation, and other factors go into the IRS determining the number.
Related: Mileage Guide For Employers
It is important to note that this is an optional rate for companies to offer to their employees. There isn’t a federal requirement or mandate to do so, although some states have their own requirements. Generally, companies that offer mileage reimbursement plans tend to hire and retain higher-quality candidates.
How Will the 2023 IRS Standard Mileage Rate Change?
Generally, the standard business mileage rate has gone down steadily since 2019, from $0.58 to $0.575 in 2020, to $0.56 in 2021. The exception to this was 2022, when the rate went up to $0.585 cents per mile, and then again mid-way through 2022 to $0.625.
This is, once again, due to their determination of the fixed and variable costs of owning and operating a motor vehicle. In order to determine how the business mileage rate will change in 2023, we need to examine trends and the changes to the costs of owning and operating a vehicle through 2022.
How Have Vehicle Costs Changed Throughout 2022?
According to the United States Energy Information Administration, national average gas prices have risen from $3.50 in November 2021 to $3.80 in November 2022. These numbers don’t include the historic jump in price that took place in mid-2022, but the IRS likely will take that into account.
In addition, car insurance costs have also increased in the same time frame. With that said, a report from AAA found that the average cost-per-mile of owning a vehicle declined in 2022 compared to 2021.
Other Factors That Might Impact the 2023 Mileage Rate
Generally, the costs of owning a vehicle continue to go up, which may make one think that the standard business mileage rate will increase, but there are other factors to consider.
For instance, inflation might be an important factor. The rate of inflation decreased between 2018 and since 2021, which may be a big contributor to why the standard business mileage rate has decreased in the same time frame.
With the massive spikes in inflation that we have seen recently, the IRS could very well use that in their determination, too.
What Will the 2023 Standard Business Mileage Rate Be?
With that said, given the general increases in the costs of owning and operating a motor vehicle, we at TripLog would assume that businesses should be prepared for a likely increase in the standard business mileage rate.
We predict the number won’t go up more than a couple of cents, given the historically large 4-cent jump from early- to mid-2022, as well as the precedent set by previous years’ smaller increases.
We predict that companies should expect the rate to increase from the current rate of 62.5 cents per mile to around 63 or 64 cents per mile, but don’t be surprised if the number stays the same or even drops a cent or two.
Even for smaller companies with only a dozen or so mobile employees driving a few thousand miles each year, this can mean an increase of total reimbursement costs by several hundred or even a few thousand dollars. Larger companies with 100+ drivers may pay significantly more.
Be Prepared for an Increase in the Standard Mileage Rate Come 2023
Using a modern company mileage tracking solution like TripLog is the best way for companies to ensure they’re providing accurate reimbursement to their mobile team members and employees.
To learn more about what TripLog’s mileage tracker app can do for you and your company, please schedule a complimentary demo, or visit our pricing page to get started on your mileage reimbursement journey in minutes. You can also try our mileage reimbursement savings calculator!