IRS Mileage Reimbursement

Weary man driving on a business trip with laptop and file folders on set next to him and button up shirt hanging in back seat

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The IRS mileage reimbursement rate is an optional rate that is recommended by the Internal Revenue Service. It is used to calculate the deductible costs of operating an automobile for business, medical, or purposes charitable, or if one moves to a new home.

The IRS mileage reimbursement rate is adjusted each year and is dependent on the IRS-determined cost of operating a motor vehicle.

According to the IRS, the IRS mileage reimbursement rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study which is conducted annually by independent contractor Runzheimer International.

Runzheimer International Calculates the Rates

Runzheimer is the leading business vehicle technology and solutions provider. The mileage deduction rate went into effect January 1, 2018. The next one will be announced in December 2018 and go into effect January 1, 2019.

Runzheimer has worked with the IRS since 1980 to calculate the business mileage deduction rate using a consistent method and statistical analysis of vehicle cost components. Using detailed data from across the nation, the rate measures auto insurance premiums, maintenance costs, vehicle depreciation, and fuel and other costs that reflect the movement of prices in the marketplace.

Costs of operating an automobile include depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

2018 Mileage Reimbursement Rates

The 2018 optional standard mileage rates for the use of a car, van, pickup, or panel truck are:

  • 54.5 cents per mile for business miles driven (up from 53.5 cents in 2017)
  • 18 cents per mile driven for medical or moving purposes (up from 17 cents in 2017)
  • 14 cents per mile driven in service of charitable organizations (currently fixed by Congress)

Self-Employed or People Who Use Their Car for Business

For the self-employed individual or for employees who use their own vehicles for business-required travel, the IRS mileage reimbursement rate guides tax deductions for the use of a car or truck.

Employers use the IRS mileage reimbursement rate to reimburse employees for business-related use of their personal vehicle. In these instances, employees are generally required to produce receipts and mileage reports.

Taxpayers may not use the IRS mileage reimbursement rate for tax purposes on their income tax return if they have used a depreciation method (for the same vehicle) to account for vehicle use in the past.

Taxpayers have the option to document the actual costs of driving their vehicle or they may use the IRS mileage reimbursement rate for tax purposes. 

For example, a consultant and trainer who drives to client locations or other venues to perform services must track both the location where the service was performed and the number of miles driven round trip.

At the same time, the consultant/trainer is expected to track personal miles traveled using the same vehicle. When tax season arrives, the tax professional needs a business mileage total and a personal mileage total. They use this information to legally adjust taxes paid using the business miles as an allowed business deduction.