IRS Authorizes Another Increase In Mileage Reimbursements

Written by: Crystal O'Brien, Esq.

Perhaps not a minute too soon, the IRS has increased the optional standard mileage rate. Generally, what this means is for taxpayers who itemize deductions, they can deduct up to 58.5 cents per mile for miles driven for business, charity, medical, or in connection with moving. This rate will be accounted for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008. This increase is in response to rising gas prices and the slowing current economy and is an extraordinary increase in that it comes mid-year as opposed to at the end of a year, if at all.

In a statement issued during a June 26, 2008 press release, IRS Commissioner Doug Shulman made a statement: "Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said Shulman. "We want the reimbursement rate to be fair to taxpayers."

What Does This Mean For Employers?

In states like California, employers are not legally required to apply IRS mileage rates to their mileage reimbursement policies. However, employers are responsible for reimbursing employees their actual expenses incurred as a requirement and condition of employment. Because IRS mileage rates provide fair guidance as to how to calculate actual mileage expense, many employers readily rely on these rates. Thus it is anticipated that many employers will follow the IRS's lead and increase mileage reimbursement accordingly. 

It is laws like these that employers and employees alike need to stay updated on to make sure businesses are abiding by all the rules and regulations that are constantly evolving and changing.  If ever in question or doubt, please do not hesitate to contact a Human Resource Consulting firm like MMC. 

For more information please visit IRS website.