The Internal Revenue Service (IRS) has released the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Effective January 01, 2023, the rates are:
- 65.5 cents per mile driven for business use, an increase of 3 cents from the rate set in mid-2022.
- 22 cents per mile driven for medical or moving purposes, consistent with the rate set in mid-2022.
- 14 cents per mile driven in service of charitable organizations—the rate remains unchanged and can only be changed by an act of Congress.
Note: The rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
Under the Tax Cuts and Jobs Act of 2017, taxpayers cannot:
- claim a miscellaneous itemized deduction for unreimbursed employee travel expenses and,
- cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. See Moving Expenses for Members of the Armed Forces for more details
According to the IRS, taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use and then, in later years, choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.
Are you a Church Law & Tax Advantage Member? If so, read on to learn more about other key tax developments affecting pastors and church leaders heading into 2023.
What does the business mileage rate increase mean for churches?
Increased amounts of reimbursement represent increased budget expenses, and that means adjusting budgets in ways that affect other ministry spending.
Conversely, attempts to minimize budget impacts by reimbursing only a portion of the rate—or not reimbursing at all—creates increased burdens for pastors and employees who use their vehicles for church-related business.
And because unreimbursed employee business expenses are not deductible under the Tax Cuts and Jobs Act of 2017, pastors and employees with unreimbursed mileage cannot seek any tax relief when they file next year’s federal income tax returns.
As you and your leaders navigate how to handle this increased expense, you may want to review some wise guidance provided by CPA and Church Law & Tax Senior Editorial Advisor Michael Batts.
In this Q&A, he answers this question: How does our church adjust its budget during times of rapid change and uncertainty?
One final note:
Church employees who drive their personal vehicles for church-related business (visitations, special events, and so on) can be reimbursed by the church, if the church has an accountable reimbursement arrangement and employees and pastors properly track and document their business miles. Since unreimbursed employee business expenses are currently not deductible, employees can no longer calculate a mileage deduction on their annual tax returns. Current law allows for a reinstatement of the deduction for unreimbursed employee business expenses in 2026.
