On December 17, 2021, the Internal Revenue Service (IRS) issued the 2022 optional standard mileage rates, which are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning January 1, 2022, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021;
- 18 cents per mile driven for medical, or moving purposes for qualified active-duty members of the Armed Forces, up 2 cents from the rate for 2021; and
- 14 cents per mile driven in service of charitable organizations (unchanged from 2021).
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.
Under California Labor Code section 2802, employers must fully reimburse employees for all expenses actually and necessarily incurred — which includes reimbursing employees for required use of their personal vehicle. Expense reimbursement for personal vehicle use, however, is not limited to just gas — it also includes wear and tear, repair, oil, insurance and other costs associated with vehicle use and maintenance.
While using the IRS mileage reimbursement rate is optional, many employers typically choose to do so — and both the California courts and the California Division of Labor Standards Enforcement have stated that, absent evidence to the contrary, using the IRS mileage rate will generally satisfy an employer’s obligation to reimburse for business-related personal vehicle expenses.
As part of their January 1 compliance plan, employers should ensure that their expense reimbursement policies are updated to reflect the new, higher IRS mileage rate.