IRS Mileage Rate for 2024: What Can Businesses Expect for the Upcoming Year?
Andjelka Prvulovic
Last update on:
April 18, 2024 2:59 AM
Published on:
The IRS has set the standard mileage rate for business use for 2024 to 67 cents.
On December 14th, the Internal Revenue Service (IRS) issued federal mileage rates for 2024, reflecting minor adjustments from the previous year. These changes are primarily seen in the rates for business and medical/moving purposes.
Besides the IRS mileage rate increase of 1.5 cents per mile for business purposes, there is a 1-cent per mile decrease when it comes to deducting costs of vehicle use for medical and moving purposes.
These yearly adjustments are important for businesses that must prepare budgets for the next tax year and adjust their existing mileage reimbursement policies according to the IRS standard mileage rate for 2024.
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The IRS mileage reimbursement rates for 2024 are:
67 cents per mile for business use, an increase of 1.5 cents from the 2023 IRS mileage rate.
21 cents per mile for medical/moving purposes for qualified active-duty members of the Armed Forces, decreasing by 1 cent from 2023.
14 cents per mile for charitable organizations. This rate is set by statute, and it remains unchanged.
The standard mileage rates for 2024, which are essential for calculating deductible costs associated with operating vehicles for various purposes, are effective starting January 1, 2024.
The Timeero mobile app lets you accurately track employees’ business mileage and reimburse them for their expenses.
What Was the IRS Mileage Rate in 2023?
In 2023, the rate for business-related mileage was set at 65.5 cents per mile. Meanwhile, the standard rate for mileage related to medical or moving purposes was 22 cents per mile.
65.5 cents per mile driven for business purposes (up 3 cents in comparison to the rate set for the second half of 2022)
22 cents per mile driven for medical/moving purposes (the same as the increased midyear rate set for the second half of 2022)
The rate per mile for charitable purposes is set by statute, so it remains at 14 cents
The IRS mileage rates for 2023 came into effect on January 1, 2023 and were used through the end of the year.
Historical IRS Mileage Rates
What Were the 2022 IRS Mileage Rates?
After the decrease in 2020 and 2021, business rates and miles driven for medical or moving purposes went up in 2022. This increase is related to higher average costs of driving. Fuel prices went through the roof, and together with rising insurance rates and lower depreciation rates, the changes in the IRS mileage rates were inevitable.
22 cents per mile driven for medical/moving purposes
14 cents per mile driven in service of charitable organizations remains unchanged
These new rates applied as of July 1st, 2022.
The IRS Mileage Rate for 2021 and the Trends Before
The IRS mileage rate for 2021 was issued on December 22nd, 2020. Beginning January 1st, 2021 through January 1st, 2022, the optional standard mileage rates were:
56 cents per mile driven for business purposes (down 1.5 cents from the 2020 rate)
16 cents per mile driven for medical/moving purposes (down 1 cent from the 2020 rate)
The rate per mile driven in service of charitable organizations is set by statute at 14 cents
The optional standard IRS mileage rates for 2021 have dropped compared to 2020 (57.5 cents, 17 cents, and 14 cents per mile).
To better understand the IRS mileage rates and how they have changed over the last ten years, take a look at the table below:
Historical mileage rates overview
Looking deeper into the last five years, we can see that the rates for business expenses have increased from 53.5 cents per mile in 2017 to 58 cents per mile in 2019. Since 2019, there has been a slow decline in the rate, from 57.5 cents in 2020 to 56 cents in 2021.
There is a similar trend in the standard rate for medical/moving purposes. It has slowly risen from 2016 to 2018 and peaked in 2019. This mileage rate has been gradually decreasing in the last two years.
Unsurprisingly, both of the rates mentioned above increased in 2022. As you’ll see in the next section of the article, some of the events and economic trends in 2021 were predicted to influence the IRS rate changes, and these forecasts came true.
What Determines the IRS Mileage Rate?
How are the mileage rates set, and what factors will determine the IRS mileage rate for 2024?
Let’s shed some light on factors that come into play. To calculate the standard mileage rate, the IRS considers cost data and statistical analysis of data from the prior year.
This data includes the costs of owning and operating a vehicle, including gas prices, auto insurance premiums, maintenance costs, and other related expenses.
There is a difference in the rates for business miles and for medical or moving purposes. When it comes to driving for work-related purposes, the IRS mileage rate for 2024, just like all of the previous IRS rates, will be based on an annual study of fixed and variable costs of operating a vehicle. These vehicle expenses include insurance, depreciation, maintenance, repairs, gas, oil, and tires.
On the other hand, only the variable costs are used to calculate the rate for medical and moving purposes.
As for the charitable mileage rate, we’ve already mentioned that by statute, it isn’t adjusted in any way.
But there is more to setting the IRS mileage rate. It is a composite index that merges diverse data.
For example, natural disasters are one of the factors that influence insurance rates. Hurricanes and wildfires in 2017 and 2018 increased the number of weather-related claims and resulted in years of unprofitability for this industry.
So, in 2019, auto insurance premiums rose due to higher-than-expected losses in insurance companies caused by natural disasters, among other things.
The 2019 IRS mileage rates rose along with the rise of premiums for both commercial and corporate customers. Other factors, like increased depreciation, have also contributed to the 2019 surge.
Once COVID-19 started spreading and social distancing was encouraged, people drove less. Due to this drop in miles driven, insurers issued refunds, and the rates either remained flat or declined.
The cost of car repairs has also climbed, adding to the rise in car insurance premiums. Supply chain disruption and labor shortages have also contributed to rate increases.
How Will the 2024 IRS Mileage Rate Impact Your Business?
Even before the IRS mileage rate for 2024 was officially announced, based on higher gas prices, increasing maintenance costs, and insurance rates, the standard mileage rate was expected to go up to reflect the rise in the expenses of operating a vehicle
An increase of just a few cents may seem like little, but reimbursing just 1.5 cents more per every business mile driven by each of your team members can quickly add up and lead to considerable expenses.
This is another reason why reliable mileage tracking apps can save a company’s money: they increase workers’ accountability and enable accurate mileage recording.
Understanding the Standard IRS Mileage Rate
Also known as deductible mileage or the mileage per diem, the optional standard mileage rate is the default cost per mile set by the IRS. The IRS establishes the optional standard mileage rate for business, medical, and moving purposes each year. The charity mileage rate is the only one that isn’t subject to change. Instead, it’s fixed by Congress.
To summarize, there are three standard mileage rates for taxpayers who deduct expenses of using personal vehicles for any of the abovementioned purposes.
Regarding miles driven for moving purposes, a 2017 tax reform has suspended moving expense deductions except for active-duty military personnel.
Only armed service members relocating under permanent change of station orders can qualify for the deduction.
What Does the Business Mileage Rate Cover?
For starters, if your employees use their personal vehicles for work-related purposes, it’s good to know that the same IRS mileage rate applies to all automobiles (cars, vans, pickup trucks, and panel trucks).
The mileage rate the IRS sets includes variable and fixed vehicle operating costs. The variable costs include maintenance (like periodic oil changes and tire rotations), gas, oil, and repairs.
On the other hand, insurance, registration, lease payments, and depreciation fall under the fixed costs of operating a vehicle.
Bear in mind that IRS mileage rates don’t cover tolls or include parking costs. And these rates don’t vary by geography either.
Flat Rate vs a Per-Mile-Rate
Some enterprises pay car allowances - monthly flat rates for reimbursement, especially if employees regularly use their vehicles for work-related purposes. Offering flat rates may seem more practical, and it is a way to comply with any law, but you may end up overpaying your staff for mileage. This could also incur additional taxes.
For that reason, most companies go with the more cost-effective model of a per-mile rate and stick to the standard IRS mileage rate for reimbursing their employees for business travel.
Do Companies Need to Reimburse Mileage at the IRS Rate?
According to federal laws, employers aren’t required to reimburse their employees for mileage. The 2024 IRS mileage rate is optional, just like all previous years’ standard mileage rates for employees.
Still, in some jurisdictions, state laws may apply, so employers need to stay mindful of state labor laws to stay compliant. Following the Labor Code 2802, in California, employers must cover their employees' business expenses, including the costs incurred by using their private vehicle for business purposes. If not compliant, employers can face quite costly wage and hours lawsuits.
Aside from staying on the right side of the law, having a mileage reimbursement policy based on the business mileage rate comes with certain benefits. Most importantly, it is a smart way to attract and retain top-performing employees and get your tax return.
When discussing tax purposes, we must keep in mind that the reimbursement is tax-free to both the employer and the employee unless it is higher than the actual cost of driving for business-related purposes. In this case, the reimbursement would be considered compensation, and therefore, it would be taxable.
Automated Mileage Tracking - The Future of Reimbursement Expenses Management
Tracking your work mileage accurately is important. If you’re audited, you must show a log of the miles your employees drove to substantiate your dedication.
Unfortunately, the traditional ways of tracking mileage and record-keeping come with numerous issues, from relying on employee trust to errors and inaccurate reports.
Technological advances have made it possible to eliminate pen-and-paper mileage templates and sheets and automate tracking and reimbursement expense management. Companies relying on field teams will profit from these smart tech solutions.
How Can Timeero Help Me Improve Mileage Tracking?
Best mileage tracker apps are designed to help you track mileage driven and avoid wasting time and money on time-consuming, inaccurate reporting. Timeero can help you significantly improve your mileage tracking in several ways.
Automated Real -Time Tracking
Timeero excels in tracking employees' real-time location and mileage, offering a dynamic and automated approach to mileage tracking.
When an employee is clocked in using the app, Timeero will automatically track their mileage.
Timeero mobile app uses drive detection technology, which means you only need to set a base speed (e.g., 4 mph). Once your worker exceeds this threshold, Timeero automatically logs their mileage. This way, Timeero eliminates the need for manual input, reducing errors and ensuring accurate mileage records.
Segmented Tracking
One of Timeero’s standout features is segmented mileage tracking. This tool calculates your employees' time and mileage on various work activities.
Using this feature, you can easily see the visual timeline of your employees' activities:
Business trips, along with details such as travel distance and time
Time spent on various jobs and locations.
Using the Segmented tracking feature, you get a birds-eye view of your employee’s workday.
There is no need for the employees to clock in and out several times a day: a single punch at the start and end of the shift is enough to ensure the app captures all work-related activities.
If there are any inaccuracies - such as too much time spent traveling or excessive mileage, you will notice them immediately.
Commuter Mileage
Timeero lets you easily distinguish between business and commuter mileage. You can set it up to log mileage only when an employee travels beyond a predefined distance from their home to the workplace.
This way, you can ensure that non-reimbursable commuting mileage is excluded from business mileage logs, maintaining accuracy in expense reporting.
Shortest Distance and Suggested Mileage for Cost Efficiency
Timeero also offers the shortest distance and suggested mileage feature, helping you minimize fuel costs and reduce overall mileage reimbursement by ensuring that your employees follow the most efficient routes.
If you add locations to the jobs you assign to your employees, the app can point them in the shortest direction.
Timeero lets you view actual vs. suggested routes.
After the trip, the app can compare the actual mileage vs. the distance suggested.
Route Replay for Accountability
The route replay feature provides detailed insights into the routes taken by your employees.
Replay your employees' routes in detail.
Route replay overview offers breadcrumbs with timestamps and vehicle speed details, allowing managers to verify if their crew adheres to the suggested routes. This feature can promote accountability and significantly enhance your team's efficiency.
Smooth Mileage Reimbursement with Accurate Reporting and Integration
Besides its advanced tracking features, Timeero helps you streamline the mileage reimbursement process by generating accurate and detailed reports based on precise and verifiable data.
Generate accurate mileage reports with a few clicks.
Moreover, Timeero's integrations with popular accounting and payroll software, such as QuickBooks, ADP, Gusto, and others, significantly simplify the reimbursement process, reducing administrative overhead and minimizing the potential for errors.
To learn more about other ways Timeero can benefit your business, read our Timeero review. Or, just sign up for a free trial and immediately see the benefits.
Key Takeaways
To summarize, new standard IRS mileage rates are set each year in December for the upcoming year. On the federal level, these rates are optional and non-binding for employers. In some cases, state laws apply, and companies may be required to reimburse their employees to stay legally compliant.
Sticking to the standard IRS mileage rate in 2024 may be the best way to develop an efficient and fair mileage reimbursement policy. It provides employers with tax-deduction benefits and more.
It is also a great perk for the company’s workforce that can help attract and retain high-quality employees, the most valuable asset of every enterprise.
IRS Standard Mileage Rate FAQ
Does the IRS mileage rate include gas?
Yes. The IRS standard mileage rate covers the expenses related to owning and operating the vehicle. This includes the costs of gas.
Does the IRS mileage rate include tolls?
No. The IRS mileage rate for 2024, just like previous years, does not include tools and parking expenses.
Automate mileage tracking and simplify mileage reimbursement
Andjelka is a sociologist turned digital marketer. She specializes in creating content for SaaS and software companies. When she’s not researching the most effective employee management techniques, Andjelka loves cooking, reading, and fighting for human rights.
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