The IRS has recalculated the optional mileage rates of
operating a vehicle for business, charitable, medical, or moving reasons for
Effective January 1, 2012, optional mileage rates have been updated to the following:
55.5 cents per mile for business miles driven
23.0 cents per mile driven for medical or moving purposes
14.0 cents per mile driven in service of charitable organizations
The IRS states:
"A taxpayer may not use the business standard mileage rate for a vehicle
after using any depreciation method under the Modified Accelerated Cost
Recovery System (MACRS) or after claiming a Section 179 deduction for that
vehicle. In addition, the business standard mileage rate cannot be used for any
vehicle used for hire or for more than four vehicles used simultaneously."
As a practicable matter, most businesses use these rates to reimburse employees for business-use of their
personally-owned vehicles. This approach is convenient, efficient and provides for a safe-harbor election for reimbursing employees for bonafide business-use of automobiles when used in conjunction with an accountable reporting plan.
As an option, businesses may choose to calculate the actual costs of operating personally-owned vehicles instead
of using these standard mileage rates set by the IRS. However, the time and effort that it takes to collect, summarize and compute the business-portion of such actual costs typically is very time consuming and can distract businesses and employees from performing their normal duties. Such intangible costs should be considered before adopting a reimbursement policy based upon the business-portion of actual costs incurred. In addition, such approaches are often highly scrutinized upon audit by the IRS.