With gas prices spiking this Memorial Day, Capitol Hill awaits IRS action on tax deductible mileage rate requests
This coming Memorial Day long weekend is the first in more than two years that millions of Americans are treating as more-or-less normal. (Remember that?) And people's pent-up travel wishes are pushing aside COVID-19 pandemic worries in a big way.
AAA predicts 39.2 million people will travel 50 miles or more from home this Memorial Day three-day holiday. This is an increase of 8.3 percent over 2021, and brings travel volumes almost in line with those in 2017.
But another year also comes to mind. Back in 2012, gasoline was $3.64 per gallon. When adjusted for inflation, that's $4.30 in today's dollars.
That's close to 2022's record-setting national average. Pump prices hit the highest mark ever of $4.331 per gallon on March 10, and kept climbing.
Today, May 24, AAA says the national average for a gallon of unleaded gasoline is $4.598.
State variations, but all fuel prices expected to go up: It's obviously higher in some places, as states add their own fuel excise taxes and various fees to the cost of gasoline and diesel.
The most expensive gas is found in California, where some stations are charging more than the $7.25 per hour federal minimum wage.
Will pump prices everywhere go up as we head into the holiday that marks the traditional start of summer? I expect that to happen, even here in Texas, where pump prices tend to be lower than the national average. Today's advertised cost of a gallon at a station in my suburban Austin neighborhood, pictured below, is the most expensive I've seen in the 17 years we've lived here.
U.S. gasoline prices tend to increase during the summer, thanks to increased demand and a more costly summer fuel blend. Add drivers wanting to hit the road again after coronavirus delayed trips. Then top it off with the chaos in global oil markets due to Russia's invasion of Ukraine.
Congress pushing IRS to adjust gas deduction rates: The escalating fuel costs are why some members of Congress as asking the Internal Revenue Service to take action to help drivers who use their vehicles to conduct business.
Each year, the IRS adjusts the per-mile rates that taxpayers can use to claim some driving related tax breaks. These amounts are known as the optional standard mileage rate that taxpayers can use in lieu of tracking all their actual tax-deductible vehicle costs.
For 2022, the deductible travel rates are 58.5 cents per mile (cpm) for business travel; 18 cpm for medical-related travel; and 18 cpm to move possessions if you're a military member who is reposted. The IRS also allows claims of 14 cpm for charitable travel, but that rate is set by statute and is not annually adjusted.
Those standard mileage rate changes were made at the end of 2021. Since then, inflation has jumped, taking fuel prices with it. That prompted a group of 18 House Democrats to send IRS Commissioner Chuck Rettig a letter on May 13, urging him to increase the 2022 rate used to calculate the cost of operating an automobile for business purposes.
They want the deductible rate change made retroactive to March 1, when the initial historic pump hike occurred.
The IRS has made such adjustments in the past, so it's not an unusual request. Reps. Ruben Gallego of Arizona and Sharice Davids of Kansas who led the House move noted in their letter that in June 2011, the IRS increased the standard mileage rate by 4.5 cents per mile "in recognition of recent gasoline price increases."
Since gas prices are spiking now, the Representatives argue "it is appropriate for the IRS to move to ensure that its standard mileage rate deduction grows proportionately to increases in prices."
The 16 other Democrats who joined Gallego and Davids in signing the letter to Rettig are André Carson of Indiana; Katie Porter of California; Sanford D. Bishop, Jr. of Georgia; Adriano Espaillat of New York; Marie Newman of Illinois; Madeleine Dean of Pennsylvania; Angie Craig of Minnesota; Mike Levin of California; Nanette Diaz Barragán of California; Josh Gottheimer of New Jersey; Raul Ruiz, M.D., of California; Nydia M. Velázquez of New York; Sean Patrick Maloney of New York; Ted W. Lieu of California; Salud Carbajal of California; and Cynthia Axne of Iowa.
Senators wrote first: This is the second such mileage rate adjustment letter Rettig has received this year.
After the national per gallon average hit its first record high, Democratic Sens. Catherine Cortez Masto of Nevada and Michael Bennet of Colorado wrote the IRS commissioner.
As with the latest correspondence from the House, the Senators' March 25 letter noted that the current business mileage rate was released on Dec. 17, 2021, when the national average gas price was less than $3.40 per gallon. And they cited the previous changes enacted by the IRS in other inflationary times
But Cortez Masto and Bennet want all the rates, not just the business travel one, adjusted.
"An increase in the per-mile reimbursement rate will offer some relief to Americans who use a personal vehicle for everyday needs like work travel or medical transport," the pair wrote. "By enabling independent contractors and businesses to adjust for increasing expenses, it will also offer relief to medical service providers and nonprofits providing critical care to families in need, particularly in rural areas, as well as help small businesses struggling with higher costs for transporting goods."
Will Rettig respond as the lawmakers wish? I'm betting he will.
Not only will it help the taxpayers who use the standard optional mileage rates, it'll be a nice positive public relations move. Any iota of goodwill is something the IRS definitely can use right now.
You also might find these items of interest:
- When did your state adopt its gasoline tax?
- Don't get your hopes up for a federal gas tax holiday
- Most states now collect fees on energy-efficient autos
- Tax-deductible standard mileage rates increase in 2022