Does your business reimburse employees for mileage? If so, did you know the IRS revises the standard mileage rate each year?
After a significant increase in the mileage rate for the use of a personal vehicle for business purposes in 2019, this year the rate has slightly decreased.
Below, we have compiled the latest information on the mileage rate published by the IRS (Internal Revenue Service). Let’s dive in!
SUGGESTED READ: Your comprehensive guide to 2019 IRS mileage reimbursement
There have been some significant changes in the mileage rate this year. These changes will be applicable, starting from January 1st, 2020. The new IRS standard mileage rate can be used by taxpayers to calculate the deductible costs for operating a vehicle for business, medical, and charitable purposes.
Some points to be noted are:
The standard mileage rate is set based on the annual data compiled for the fixed and variable costs. This includes repairs, maintenance, depreciation, insurance, tires, gas, and oil. For the mileage rate of medical and moving purposes, it is calculated based on just the variable costs.
The current law, Tax Cuts and Jobs Act states the following:
1. The depreciation portion of the standard mileage rate will be 27 cents per mile. (1 cent more than in 2019.)
2. Under the fix-and-variable-rate (FAVR) plan, the maximum standard automobile cost is $50,400 (the same as 2019) for all automobiles.
Employees may usually use their vehicles to run office errands. In such cases, the IRS mileage rate is a useful benchmark for calculating mileage expenses to be reimbursed to employees. It also plays a vital role in ensuring policy compliance.
Maintaining a mileage record can help your team calculate, analyze, and monitor every cent spent on the business. Additionally, employee handbooks and mileage log records can be used as reference points by your finance teams to make well-informed business decisions. It also helps detect and prevent any expense fraud.
Are you interested in getting an accurate and reliable mileage calculation for your employee mileage reimbursements? Schedule a demo with Fyle to learn how you can incorporate the latest IRS mileage rate into your expense policy!