The Internal Revenue Service (IRS) has updated the optional standard mileage rate in 2020 to 57.5 cents per mile, a decrease of 0.5 cents from 58 cents per mile in 2019.

This announcement, made on December 31, 2019, is an update on the standard mileage rates for conventional vehicles (cars, vans, pickups or panel trucks) per business mile driven. It has also updated the standard mileage rate to 17 cents per mile for medical or moving miles driven while the rate for charitable service miles driven remains at 14 cents per mile.

This decrease in the standard mileage rate also aligns with the change in fuel prices expected in 2020 compared to 2019. The U.S. Energy Information Administration (EIA) projects the average gallon of gas to cost $2.57 in 2020, which is about equal to the projected cost in 2019 at $2.56/gal. Other costs related to owning a vehicle in the US, such as auto insurance and regular maintenance, continue to increase, though. 

The IRS calculates standard mileage rates following an annual study of the costs associated with operating a vehicle. The mileage rates tend to follow the price of gas, but a variety of measurements are weighed to determine the cost of owning and operating a vehicle. In fact, a CompanyMileage analysis found that fuel accounts for about 30% of overall vehicle cost. Insurance accounted for 12%; licenses, registration and taxes for 7%; and tires and maintenance 3% each. The biggest factor in our vehicle cost analysis was 45% of the overall cost represented by depreciation.

Even small changes in gas prices can represent a substantial difference at the end of the year. For an employee reimbursed at the new IRS rate for driving 10,000 miles a year, Friday’s adjustment of half a cent means $50.00 less in their pocket. While these numbers seem modest at an individual level, they add up quickly for companies reimbursing several dozen or hundred employees.

These updated mileage rates, with some major considerations, are optional. While businesses have the option of using a different methodology, many choose to use the IRS rates because it can be challenging to create a consistent method of calculating and tracking the cost of vehicle usage across a large fleet.

SureMileage by CompanyMileage addresses these issues by using a different approach to calculating mileage reimbursement. With SureMileage, employees report their starting and ending points, and the system calculates the most expedient driving route between them. The app then calculates the expenses to be reimbursed based on those predetermined rates. At no point will employees need to report odometer readings or maintain a mileage log. SureMileage also significantly cuts down on instances of reimbursement fraud. 

With features such as an integrated address book and on-the-fly rate changes, SureMileage makes it easy for employees to input their miles, adjust rates based on the vehicle used and save new destinations for future use. 

Don’t forget to communicate the new IRS mileage rates with your employees. To better manage your mileage reimbursement process, reach out to CompanyMileage today.

See more information about the IRS Announcement here: