15 December 2023

IRS Announces New Mileage Reimbursement Rates for 2024

By Ronald Smith

Guess what? The IRS just came out with the latest mileage reimbursement rates for 2022, and there are a few changes you should know about. If you use your car for business or for medical or moving purposes as a member of the Armed Forces, you’ll be happy to hear that the rates have gone up. However, if you’re driving for a charitable organization, the rate remains the same.

2022 Mileage Reimbursement Rates at a Glance

Let’s take a closer look at the new mileage reimbursement rates set by the IRS:

  • For business use, the rate is now 58.5 cents per mile. That’s a 2.5 cent increase from the previous year’s rate.
  • If you’re an active-duty member of the Armed Forces using your car for medical or moving purposes, you’ll get reimbursed at a rate of 18 cents per mile. This is up by 2 cents from last year’s rate.

When you drive your car to help out a charitable organization, you can get a tax deduction of 14 cents for each mile you drive. This rate has not changed since 2021 because it is set by law.

Now, let’s talk about when this rule goes into effect. It applies to four things:

1. If you pay for transportation expenses that are related to your charitable work or service;

2. If you receive mileage allowances or reimbursements for your volunteer work or for being a member of the Armed Forces;

3. If you pay for transportation expenses while doing volunteer work or serving in the Armed Forces;

4. If your employer provides you with a car for personal use, you need to know the maximum fair market value (FMV) of the car. This is important because your employer may calculate the value of the car using the fleet-average valuation rule or the vehicle cents-per-mile rule.

Lastly, the IRS wants to make sure you are aware of this information. They have issued a notice to let you know about the tax deductions and rules related to driving for charitable purposes.

As a taxpayer, you can’t deduct your unreimbursed employee travel expenses anymore under the Tax Cuts and Jobs Act. Bummer, I know.

Oh, and moving expenses? Yeah, you can’t deduct those either, unless you’re a member of the Armed Forces on active duty moving under orders to a permanent change of station. They get a special exception. If that’s you, check out the Moving Expenses for Members of the Armed Forces page for more info.

How the IRS Sets the Mileage Rate

Ever wonder how the IRS decides on the mileage rate? Well, here’s the scoop:

The IRS crunches some numbers to come up with the rate. They analyze stats and cost data from the previous year, taking into account a bunch of different factors.

First, let’s talk about how the IRS figures out how much it costs to own and use a car. They look at things like the price of gas, insurance, maintenance, and other expenses related to having a car.

Once they have this information, the IRS then looks at different rates for driving a car for business, medical, or moving purposes. These rates can vary a lot.

For business purposes, the IRS sets the rate based on a study they do that looks at both fixed costs (like insurance and depreciation) and variable costs (like maintenance and gas).

When it comes to medical or moving purposes, the IRS only looks at the variable costs and uses that to set the rate.

There’s also a rate for driving for charity, and the IRS doesn’t make any adjustments to that rate.

Reimbursing Your Employees

Did you know that there isn’t a federal law that requires employers to pay for their employees’ mileage and vehicle costs? The only exception is if not reimbursing employees would bring their net wages below the minimum wage.

Now, when it comes to individual states, some states do require mileage reimbursement while others don’t. If you have drivers working for you, it’s important to stay updated with the laws in your specific state.

Here’s the thing: offering mileage reimbursement is a common practice among most businesses, big or small. If you don’t offer it in today’s labor market, you’ll certainly have a hard time finding drivers for your open positions.

Mileage reimbursement is already a good idea, but you can make it even better by implementing a policy to manage the whole process.

So, how can you start? Well, first of all, clearly communicate your policy to your drivers as soon as you hire them. Additionally, it’s a good idea to collect relevant data based on your location and keep track of mileage and vehicle costs for each driver. You might also consider using an automated solution to make the tracking process easier.