For the first time ever, a gallon of regular gas now costs $5 on average nationwide, according to AAA. Increasing gas prices have hit home and community-based providers like home health and hospice agenices particularly hard. Given the nature of the job, clinicians and home health aides might be required to visit multiple clients a day using their own personal vehicle. For many workers making $10-13 an hour the additional cost of gas can force them to leave the industry and can have a significant impact on recruiting new workers.

On June 9, 2022 the IRS attempted to alleviate some of those pressures by announcing an increase in the optional standard mileage rate for the final six months of 2022. Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating a vehicle for business purposes. For the final six months of 2022, the standard mileage rate will be 62.5 cents – that’s a 4-cent increase from the start of the year. This new rate will be effective July 1, 2022. One important caveat, the 14 cents per mile rate for charitable organizations remains unchanged as it’s set in federal statute.

Additional legal guidance on the new rates was also released.

The IRS normally makes updates in mileage rates once a year in the fall for the following calendar year however, given the historically high cost of gas in the last several months, the IRS wanted to take steps to help taxpayers, businesses and others who use this rate. These types of changes are rare, the last mid-year rate increase happened in 2011.

The milage rate includes other items in its calculation such as depreciation and insurance and other fixed and variable costs. This optional business standard milage rate is used by many businesses to calculate deductible costs of operating a vehicle for business use in lieu of tracking actually costs. It’s also used by the federal government and many businesses to reimburse their employees for milage. A link to the IRS announcement is in the call resources.

While the IRS’ decision to increase standard mileage rates is a positive indication, it is not enough to cover quickly rising costs which were caused by circumstances outside the control of home and community-based providers. LeadingAge will continue to advocate with the Administration for thoughtful policy changes to reduce the burden of inflationary costs on the already squeezed health care workforce.