The Internal Revenue Service (IRS) has updated the optional standard mileage rate in 2019 to 58 cents per mile, an increase of 3.5 cents from 54.5 cents per mile in 2018.
This announcement, which was made on December 14, 2018, 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 standard mileage rates to 20 cents per mile for medical or moving mile driven, and 14 cents per mile per charitable service mile driven.
The new business mileage rate represents a 6.41% increase from the previous year. The U.S. Energy Information Administration projects the average gallon of gas to cost $2.75 in 2019, which is equal to the projected cost in 2018, and a 13.65% increase from 2017.
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 remain fairly steady despite significant changes.
Although the mileage rate has changed, fuel is not the biggest vehicle expense for employees. In fact, a CompanyMileage analysis found that fuel accounts for about 30 percent of overall vehicle cost. Insurance accounted for 12 percent; licenses, registration and taxes for 7 percent; and tires and maintenance 3 percent each. The biggest factor in our vehicle cost analysis was the 45 percent of the overall cost represented by depreciation. That’s not surprising when you consider that an employee who drives a personal vehicle for work for three years might put another 30,000 or 40,000 miles on that vehicle.
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 means $350 more 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 go with 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 point and destination. The system then calculates the driving distance between them. The app then calculates the expenses to be reimbursed based on those predetermined rates.
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. Remember to communicate the new IRS mileage rates with your employees. And consider taking the opportunity to remind them about your mileage reimbursement policies as well as the safeguards you have in place to ensure accuracy.