What Is the IRS Mileage Rate? The IRS mileage reimbursement rate, also known as the safe harbor rate, is a guideline for business mileage reimbursement. It applies mostly to employees or independent contractors who use their private vehicles for work purposes. The IRS conducts an annual study of the fixed and variable costs of operating a car in the US before setting their standard mileage rate. On the rates for medical and moving purposes, variable costs are also accounted for to provide more comprehensive figures. The IRS mileage rates are subject to change and revision every year to better align with prevailing circumstances. Some of the factors that help determine the IRS mileage reimbursement rate are: Cost of fuel Vehicle maintenance Insurance rates Vehicle costs According to Notice 2019-02, the standard mileage reimbursement rates for the use of a car are: 58 cents per mile driven for business 20 cents per mile for medical or moving purposes 14 cents per mile for charitable work The following table summarizes the IRS standard mileage rates for operating an automobile over the past decade. Period Rates in Cents Per Mile Source Business Charity Medical Moving 2019 58 14 20 IR-2018-251 2018 54.5 14 18 IR-2017-204 2017 53.5 14 17 IR-2016-169 2016 54 14 19 IR-2015-137 2015 57.5 14 23 IR-2014-114 2014 56 14 23.5 IR-2013-95 2013 56.5 14 24 IR-2012-95 2012 55.5 14 23 IRB-2012-02 July 1 – Dec. 31, 2011 55.5 14 23.5 IR-2011-69 Jan. 1 – June 30, 2011 51 14 19 IR-2010-119 2010 50 14 16.5 IR-2009-111 Table Courtesy of the Internal Revenue Service The table shows an increase in the business mileage rate by 3.5 cents and 2 cents for medical expenses. The rate for charitable works is set by a statute and thus remains unchanged. The notice also states that for cars used for business, the part of the mileage reimbursement treated as depreciation will be 26 cents per mile for 2019. This is an increase from 25 cents in 2018. What Does the IRS Mileage Rate Mean for You? As an employee or small business owner, you may already be aware that tracking your business mileage can earn you a tidy tax deduction. But tax breaks aren’t the only benefits you can earn from tracking your mileage. You may also be eligible to earn mileage reimbursements through expense reports. However, there are no federal laws currently mandating businesses to reimburse their employees for their business mileage. That is, except for California. Section 2802(c) of the California Labor Code requires employers to indemnify their employees for all losses and expenses incurred as a direct consequence of the discharge of their duties. This means that if you live in California, you may earn compensation for any personal expenses you incur at work, including but not limited to the miles you drive. However, in the rest of the country, this is not guaranteed. And that’s where mileage reimbursement comes in. If you keep track of all the miles you drive for work, you can add them to your expense report and your employer will reimburse you for the miles. In this case, you can get a nice deduction from the IRS, but you will not be eligible for a tax break on these miles, as that would be considered “double-dipping.” If your employer doesn’t use the IRS mileage rate to work out your reimbursement, then you’ll get a partial deduction. Remember, the standard mileage rate is simply a guideline, and your employer is not obligated to follow it. In this event, you can claim the difference between the IRS rate and the mileage reimbursement rate that your employer gives you. Mileage Reimbursement for Self-Employed Workers Vehicle Mileage Tracker As a self-employed worker, you can still claim a tax deduction from the IRS for your mileage as a business expense. Do this by adding up your mileage for the year, and then multiplying it by the standard mileage rate. For instance, if you drove 1000 miles, then: 1000 miles x $0.58 (IRS mileage rate) = $580.00 due as a deduction Also, as a self-employed worker, the IRS requires that you keep a mileage journal or use a mileage tracking app to track your driven miles. You should also keep in mind that you cannot use the business mileage rate for your car after using any depreciation method under the Modified Accelerated Cost Recovery System. This also applies if you have claimed a section 179 deduction for that vehicle. Additionally, you cannot use the IRS mileage rate on more than four vehicles in operation simultaneously. Lost Personal Mileage Deductions In the past, if you were not reimbursed for your business mileage, you could deduct it from your taxable income along with other unreimbursed work-related expenses. But this was only possible if all such expenditures totaled more than two percent of your gross income. But, as per the Tax Cuts and Jobs Act, you can no longer claim a miscellaneous itemized deduction for unreimbursed travel expenses. Also, you cannot claim a deduction for moving expenses unless you are an active member of the US armed forces, moving under orders to a change of station. Should this arise, you can approach your employer about the potential impact of the tax change on your bottom line. You can then push for a new or revised reimbursement policy to recoup these tax losses. Fixed and Variable Rate Plans In instances where the IRS Mileage Rate is less than the actual cost of using your vehicle, you can calculate the exact cost and use that instead. Notice 2019-02 also provides maximum automobile expenses when using a Fixed and Variable Rate (FAVR) allowance plan. This plan enables you to receive tax-free reimbursement from your employer for fixed vehicle costs, such as: Insurance, Registration fees, and Automobile taxes. It also allows for reimbursement on variable vehicle expenses, such as: Cost of fuel, Tire replacement, and Routine repairs and maintenance. According to the FAVR plan, the cost of the car may not exceed a maximum amount set by the IRS each year. For 2019, that amount is $50,400. One of the key benefits of the FAVR plan over a flat rate is that it may be tailored to your specific cost and actual monthly mileage. When deployed correctly, it can even help avoid over or underpayment. Although the IRS mileage rate offers a guideline for employees’ mileage reimbursement, it might not always be the ideal rate. Thankfully, you can negotiate a more favorable rate with your employer, based on your actual business mileage. But to do this, you will need a meticulous and accurate way of keeping track of your work-related mileage and vehicle expenses. Your most efficient solution is to use a mileage tracking app, which is where the GOFAR vehicle mileage tracker comes in. GOFAR is an advanced mileage tracker that fully automates your work-related car expenses to give you a complete record of your mileage for easier reimbursement. It helps you keep track of the: Mileage Date of trip Destination of trip Fuel spend You can instantly export all of this information in a spreadsheet to your email as supporting documentation for your tax claims. GOFAR is also compatible with the IRS mileage rate and offers ready access to your expense claim summary for a hassle-free reimbursement and tax claim.