IRS Mileage Rate for 2024: What Can Businesses Expect For The Upcoming Year
Andjelka Prvulovic
Last update on:
October 24, 2024 5:39 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 the 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.
Knowledge of these yearly adjustments are important for businesses that must prepare budgets for the upcoming tax year and need to adjust their existing mileage reimbursement policies to refelct the IRS standard mileage rate for 2024.
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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.
What Was the IRS Mileage Rate in 2023?
In 2023, the IRS 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 IRS Mileage Rates in 2022?
After rates decreased in 2020 and 2021, rates for mileage associated with business travel and medical or moving purposes went up in 2022. With higher average driving costs, increased fuel prices, rising insurance rates, and lower depreciation rates, changes to 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.
IRS Mileage Rates for 2021 and Previous Trends
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 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
A closer look at the last five years, shows 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 IRS rate, dropping from 57.5 cents in 2020 to 56 cents in 2021.
There is a similar trend seen in the standard rate for medical/moving purposes. The rate slowly rose from 2016 to 2018 and peaked in 2019. This mileage rate has been gradually decreasing over 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.
How is the IRS Mileage Rate Determined?
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 between the rates for business miles and those for medical or moving purposes. When it comes to driving for work-related purposes, the IRS mileage rate for 2024 will be based on an annual study of the fixed and variable costs of operating a vehicle. These vehicle expenses include insurance, depreciation, maintenance, repairs, gas, oil, and tires.
However, 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 involved when it comes to determining the IRS mileage rate.
For example, natural disasters are one of the factors that influence insurance rates. In 2017 and 2018, hurricanes and wildfires caused an increase in the number of weather-related claims submitted. This resulted in years of unprofitability for the insurance industry.
So, in 2019, auto insurance premiums rose due to higher-than-expected losses experienced by insurance companies in 2017 and 2o18.
The 2019 IRS mileage rates rose along with the premiums for both commercial and corporate customers.
Once COVID-19 began spreading and social distancing was encouraged, people drove less. With the decrease 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?
With higher gas prices, increasing vehicle maintenance costs, and increased insurance rates, the standard mileage rate was predicted to increase to reflect the expenses associated with operating a vehicle.
An increase of just a few cents may not seem like a lot, but reimbursing 1.5 cents more for 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 money: they increase employee accountability and enable accurate mileage recording.
Understanding the Standard IRS Mileage Rate
Also known as deductible mileage or 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 fixed by Congress and is not subject to change.
There are three standard mileage rates provided to taxpayers who deduct expenses associated with using personal vehicles for any of the above mentioned purposes.
Regarding the miles driven for moving purposes, a 2017 tax reform has suspended moving expense deductions, with the exception of 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?
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 types of automobiles (cars, vans, pickup trucks, and panel trucks).
The mileage rate the IRS sets includes variable and fixed vehicle operating costs. 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.
Keep in mind that IRS mileage rates don’t cover tolls or parking fees. Additionally, these rates don’t vary by geographic location 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 law, 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.
However, state mileage reimbursement laws may apply in some jurisdictions, so employers need to stay mindful of state labor laws to remain compliant. In California, according to Labor Code 2802, employers must cover their employees' business expenses, including the costs incurred when using their private vehicles for business purposes. If businesses are found to be noncompliant, employers can face costly wage and hours lawsuits.
Keep in mind that reimbursements are tax-free to the employer and the employee unless the reimbursement amount is higher than the actual cost of work-related driving. In this case, the reimbursement would be considered taxable income.
Automated Mileage Tracking - The Future of Reimbursement Expense Management
Accurately tracking work mileage is important. If you are ever audited, you will need to produce a mileage log that details every trip your employees have taken.
Unfortunately, the traditional mileage tracking and record-keeping measures come with numerous issues. Manual mileage logs can be falsified by employees and are often found to contain mistakes.
Technological advances have eliminated the need to use pen-and-paper mileage logs. There are many software solutions on the market today that automate mileage tracking and reimbursement expense management.
How Can Timeero Help Me Improve Mileage Tracking?
The best mileage tracking apps are designed to help you easily track business miles driven by your employees. Tracking apps such as Timeero, reduce the time drivers spend entering trip details by automatically recording GPS location throughout the workday.
Timeero can significantly boost your mileage tracking with its unique features.
Automated Real -Time Tracking
Timeero excels in tracking your employees’ real-time location and mileage, offering a dynamic and automated approach to mileage tracking.
Timeero automatically tracks the mileage of employees who are driving on the clock.
With the help of drive detection technology, Timeero automatically begins tracking mileage when the predetermined speed threshold is met. With this feature in play, Timeero eliminates the need for manual input, which reduces errors and ensures accurate mileage records.
Segmented Tracking
One of Timeero’s standout features is segmented mileage tracking. This tool divides an employee’s driving route into individual segments based on stops. Each stop on the map can be opened to display details such as driving speed, total miles driven, as well as how much time an employee spent at that location.
Segmented Tracking provides a visual timeline of your employees' activities:
Starting and ending times of business trips
Time spent at various job sites
Driving speed
Segmented Tracking provides managers with a birds-eye view of employee workdays.
To use segmented tracking, employees only need to clock in once at the start of their shift and once at the end of their workday. There is no need for the employees to clock in and out several times a day as they make multiple stops. The app captures all work-related activities throughout the day without employees needing to lift a finger.
This tool provides valuable insights into your employees’ driving behaviors such as excessive speeding and unauthorized detours. With a reliable travel log in hand, you can quickly address unwanted behaviors and enforce company policies.
Commuter Mileage
Timeero allows you to easily distinguish between business and commuter mileage. Timeero’s commuter mileage feature can be configured to log mileage only when an employee travels beyond a predefined distance from their home to the workplace.
With this feature enabled, you can ensure that non-reimbursable commuting mileage is excluded from business mileage logs.
Shortest Distance and Suggested Mileage for Cost Efficiency
Timeero’s shortest distance and suggested mileage feature helps you minimize fuel costs and reduce overall mileage reimbursement by ensuring that your employees follow the most efficient routes.
If you add locations to job assignments, the app will recommend the shortest driving route.
Timeero lets you view actual vs. suggested routes.
After each business trip, the app compares the actual mileage driven vs. the suggested distance.
Route Replay for Employee Accountability
The route replay feature provides detailed insights into the routes taken by your employees.
Replay your employees' routes in detail.
The route replay overview shows breadcrumbs with timestamps and vehicle speed details, allowing managers to verify if their crew adheres to the suggested routes. This feature can promote employee accountability and significantly enhances your team's efficiency.
Smooth Mileage Reimbursement with Accurate Reporting and Integration
Besides its advanced tracking features, Timeero streamlines the mileage reimbursement process by generating accurate and detailed reports based on precise and verifiable data.
Generate accurate mileage reports with just a few clicks.
Timeero's integrations with popular accounting and payroll software, such as QuickBooks, ADP, and Gusto, simplify the reimbursement process, reducing administrative overhead and minimizing the potential risk for errors.
To learn more about how Timeero can benefit your business, read our detailed Timeero review. If you would rather see Timeero’s features first hand, sign up for a free trial today.
Key Takeaways
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.
Using the standard IRS mileage rate in 2024 may be the best way to develop an efficient and fair mileage reimbursement policy, as it provides employers with tax-deduction benefits.
Additionally, implementing the standard IRS mileage rate is a great way to 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 cost of gas.
Does the IRS mileage rate include tolls?
No. The IRS mileage rate for 2024, just like previous years, does not include tolls and parking expenses.
Automate mileage tracking and simplify mileage reimbursement
Andjelka is a skilled researcher and writer with 6+ years in digital marketing, specializing in SaaS and B2B content. With a background in sociology, social work, and journalism, she crafts strategy-driven content that resonates with audiences. Outside of work, she enjoys yoga, swimming, and relaxing with her cats and Leonard Cohen’s music.
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