2018 Tax Law Changes – How Will This Affect Mileage Claims?

A Quick-Reference Guide for Employers

With all of the focus on corporate tax rate changes this year, you could be forgiven for not picking up on a small but crucial change that will affect organizations with employees who use their personal vehicles while working. In previous tax years, employees who were not reimbursed the full IRS rate for mileage by their employers could deduct the difference in excess of 2% of AGI on their tax return – although, in practice, only about a third did so. Now, with the 2018 tax law changes, unpaid Business Expenses have been eliminated altogether as tax-deductible items. This means that even those employees who have previously itemized on their tax returns to obtain a mileage relief will no longer be able to do so.

With staff turnover being a costly drag on management time, not to mention the increasing costs of recruitment, the pressure on companies to pay the full IRS rate for mileage will undoubtedly increase this year. Those organizations that do pay the full IRS rate will enjoy a competitive advantage in terms of hiring versus those that do not.

As our economy nears full employment, the pressure on employers to find and retain quality staff is expected to be a key challenge in 2018 and beyond. For employers worried about the cost of increasing the reimbursement rate per mile, a change of mindset is required. Traditionally, companies have paid less than the IRS rate per mile to offset a perception that employees may be abusing the system by artificially inflating their mileage claims.

We encourage employers everywhere to pay their staff at or near the IRS rate per mile, but to ensure all mileage claims are accurate by implementing the easy-to-use mileage tracking software by CompanyMileage. By doing this, you can save an average of 20-30% on your mileage claims – meaning in a typical application you can enjoy the competitive benefits of paying a higher rate per mile to your employees and still save money for the organization overall!

Some of the proven advantages of reimbursing a higher rate per mile for your staff include:

• Greater staff satisfaction. Running a car comes with many hidden costs. Gas and insurance are just the tip of the iceberg, so your staff will be happy that you are covering all of these extra costs in their remuneration package.
• Attract higher quality candidates for open roles. By advertising that you reimburse the full IRS rate per mile for mileage, you will become the employer of choice for the highest-performing candidates who take all factors into account when considering the employment opportunities available to them.
• Remove the temptation for your mobile workforce to inflate mileage claims or cut corners on safety. When the employer pays the employee less than the IRS recommended rate per mile for business travel, it sets up a situation where the employee might look for other ways to reclaim that cost. It could be through inflating the number of miles they really drive for work, or by making the tires last another couple thousand miles past their best. With CompanyMileage, you remove the ability and the incentive for staff to inflate the mileage claim – and by paying them more, they can afford to maintain their car correctly. This also reduces the likelihood of time lost due to breakdowns!

In conclusion, there has never been a better time than the present to begin paying your mobile workforce higher mileage rates for business travel. If it is too much to increase in one jump, you might choose to implement a staged increase from your current rate per mile towards the goal of the IRS rate over the next year or so. Whatever rate you chose, by implementing the mileage tracking and reimbursement systems from CompanyMileage, you will be sure to save considerable time and money on your mileage claims. Over the years, we have helped employers save millions of dollars – why not take the first step to joining them by requesting a demo today?