Each year the IRS sets the mileage rate per mile driven for employees who use their vehicles for company travel. In 2017, the standard mileage rate was 53.5 cents per mile.
How did the IRS determine this rate? The IRS accounts for the average costs of owning and operating a vehicle in the previous year. This means the IRS averaged historical data from 2016 to determine the 2017 standard mileage rate – despite any changes to the current costs. These include averaged fixed and variable costs.
In comparison to last year, the 2017 IRS mileage rate dipped slightly from the previous 54 cents per mile rate due to cost differences in operating a vehicle since 2016. These variable costs include decreases in gas prices based nationwide averages.
In addition to the IRS mileage rate, a business needs to consider how rates are determined in their state.
Based on the break down above, two key points also need to be considered when determining your company’s mileage rate.
- What city and state are your employees located in? Fuel prices vary greatly depending on where you live, for example the average cost of gas in New York is $2.60 but in Oklahoma it is $2.16. To check gas prices by state consult an app, like Gas Buddy (www.gasbuddy.com).
- Consider what type of car is necessary for the job being provided. For example, if you provide home health care services, your employee can drive an economy car. If your employee drives a large SUV, then the fuel cost can vary by 20 cents per mile.
These costs can add up. For example, a 17% difference in gas prices as noted above can total $6.60 each fill up for a 15-gallon tank. Let’s say they fill up once per month and multiply that times 25 employees equals $165 per month or $1,980 per year if everyone drives economy cars. If they are driving SUVs or trucks, that total is 20% higher.
The IRS will be updating the rates later this month for 2018 and Company Mileage will be able to re-calculate for your mileage reimbursement program immediately.
Sound a bit cumbersome to track? CompanyMileage software takes all these factors into consideration and provides a mileage rate for your organization based on taxes, point to point driving, vehicle type, and other factors. It even integrates you’re your expense reporting system.
Contact us today to discuss the how CompanyMileage can help you save on employee mileage reimbursement costs.