New IRS Mileage Rates

The IRS has increased the optional standard mileage rates for the final six months of 2011 due to the sharp rise in gasoline prices. The rate will increase to 55.5¢ per mile (previously 51¢ cents per mile) for all business miles driven between July 1 and Dec. 31, 2011. The new six-month rate for computing deductible medical or moving expenses will be 23.5¢ per mile, up from 19¢ for the first half of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14¢ per mile [IR 2011-69; Ann. 2011-40, 2011-29 IRB].

An employer that requires employees to supply their own autos may reimburse them at a rate that doesn't exceed 55.5¢ per mile for employment-connected business mileage in the second half of 2011, and the reimbursement will be treated as a tax-free accountable plan reimbursement. The employee must substantiate the time, place, business purpose, and mileage of each trip. Additionally, an employee's personal use of lower-priced company autos during the second half of 2011 may be valued at 55.5¢ per mile if the conditions specified in Reg. §1.61-21(e)(1) are met.

Employers paying a mileage allowance in excess of the standard rate must report the excess on Form W-2.

Taxpayers always have the option of calculating the actual costs of using their vehicle, rather than using the standard mileage rates.

The IRS generally only revises the standard mileage rates once a year (in the fall).