This article has been updated to reflect the June 9 IRS announcement of a mileage rate increase for the final six months of the year.
The IRS has increased the 2022 mileage rate for the last six months of the year in response to record high gasoline prices.
The new mileage rate for the second half of 2022 will be 62.5 cents per mile. This is an increase of 4 cents over the rate that was in place previously for 2022 (58.5 cents per mile).
The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of the year.
The new rates go into effect on July 1, 2022.
Normally the IRS sets the mileage reimbursement rate for using a personal vehicle for official business one time per year. The 2022 rate, for instance, was set in December 2021. In situations where gas prices are rising at an unusual rate such as we are experiencing this year, the agency will sometimes do a mid-year adjustment.
The National Treasury Employee Union (NTEU) sent a letter earlier this week to Internal Revenue Service commissioner Chuck Rettig requesting that the agency make a mid-year adjustment to the 2022 mileage rate for driving to help ease the burden on federal employees who use their personal vehicles for official government business.
The letter states:
While it is the IRS’s typical practice to set this rate effective at the beginning of the year for the entire calendar year, on past occasions when there have been significant rises in gas prices, the IRS has made a mid-year adjustment. Given the current situation, I urge you to make a mid-year adjustment to the mileage reimbursement rate this year to reflect the actual costs an employee will pay to operate their privately owned vehicle while traveling to perform official business. This would save federal employees from having to pay out of their own pocket for the increased travel expenses incurred in their duties as IRS revenue agents and officers, FDIC bank examiners or other federal occupations that require frequent and even daily travel while on the job. It would also do the same for many private sector employees.
The federal government uses the IRS mileage reimbursement rate to reimburse federal employees for travel on official business when using their personal vehicles.
Gas Prices Hit New Record
The announcement from the IRS follows news that gas prices have hit a new record high.
GasBuddy announced today (June 9, 2022) that by its estimates, the national average for a gallon of gasoline has surpassed $5 for the first time ever. It also said that prices have risen an average of 66 cents per gallon in the last month and that prices are expected to continue rising.
GasBuddy notes that the latest price hikes are being driven by seasonal demand as the summer gets underway and the supply of gasoline dwindles.
Gas prices have surged in recent weeks as U.S. gasoline inventories have fallen over 25 million barrels, or over one billion gallons, since the start of March amidst a global decline in refining capacity due to the Covid-19 pandemic and accelerated demand going into the summer. The price of oil has also jumped due to escalations stemming from the Russian war on Ukraine, as countries choke off Russian oil supply via sanctions, pushing supply down at a time of rising demand. In addition, U.S. refining capacity has fallen by some 1 million barrels per day over the last three years. All of these factors have created an environment ripe for a surge in gas prices, while Americans balk at prices but continue filling up as demand has seen little decline.
AAA still shows that the national average for a gallon of gas is just under $5 as of June 9, 2022 ($4.97), but no doubt that estimate will surpass $5 soon. Even by AAA’s estimates, the organization notes that since only Monday, June 6, the national average has increased by 11 cents per gallon.
AAA also wrote that Americans shouldn’t expect the high gas prices to let up anytime soon:
According to new data from the Energy Information Administration (EIA), total domestic gasoline stocks decreased by 800,000 bbl to 218.2 million bbl last week. Meanwhile, gasoline demand grew from 8.98 million b/d to 9.2 million b/d as drivers continue to fuel up for the summer driving season, typically a time when gas demand increases. This dynamic between decreased supply and increased demand is contributing to rising prices at the pump. This coupled with increasing crude oil prices means that the price of gas will likely remain elevated for the near future.