Starting July 1st, the standard mileage rates issued by the IRS are increasing by 4 cents per mile. This mid-year rate increase, which hasn’t happened since 2011, is in response to rising fuel costs.
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The business mileage rate will increase to 62.5 cents per mile from the current 58.5 cents per mile.
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The medical and moving expense mileage rate will increase to 22 cents per mile from the current 18 cents per mile.
You can read the full IRS announcement here if you’d like.
The standard business mileage rate is used by many businesses to reimburse employees for business miles they drive on their personal vehicles and/or simplify recordkeeping. Recently, we’ve had some questions about offering a tax-free reimbursement to employees that have long commutes to the office. As a reminder, the drive to the office from home is considered commuting mileage which is treated as personal mileage. If you are a business owner who would like to cover costs for an employee that does not drive a company vehicle, you will need to increase their wages. For employees that drive a company vehicle home each night, they will have an Auto Fringe Benefit added to their W-2 at year end based on the number of personal miles driven.
If you have any questions about the effect of the new rates on your business, don’t hesitate to contact us. As always, we appreciate the opportunity to serve you.
--The Team at Rader & Rader
