Every year the IRS issues its Standard Mileage Reimbursement Rate, which determines the amount that can be used as a tax deduction for business travel. It also serves as a guideline for employers who reimburse their employees for miles driven.
As of January 1, 2018, the rate has been raised to 54.5 cents per business mile driven, a cent higher than the 2017 rate. The rate for medical or moving expenses has also been raised a cent to 18 cents per mile. The rate for charitable purposes remains at 14 cents per mile.
While employers are not required to use the IRS rate to reimburse employees, the IRS will deem employers who make reimbursements up to 54.5 cents per mile as meeting their accounting requirements. As a result, such employers will not be required to report the reimbursements to the IRS, nor will they have to perform any tax withholding. On the other hand, employees who are not reimbursed for their business mileage will be able to deduct 54.5 cents per mile on their individual tax returns.
One caveat springs from the recent tax legislation: the deduction for moving expenses has been eliminated. This will be a blow for some taxpayers because they were not required to itemize in order to claim this deduction.
If you have any questions about how the mileage rates affect your tax status, or any other legal concerns, please give us a call.
Written by attorney Matthew A. Grosh