Mileage Reimbursement Rate

On November 27, 2007, the IRS announced the standard mileage reimbursement rates for the calendar year 2008.  These are the rates that should be used to calculate the tax-deductible costs for using a car for business, charitable, medical, and moving purposes.  The most common use of these mileage rates is to reimburse employees for expenses involving use of their own cars for business purposes.

Standard Mileage Rates

Each year the IRS announces new standard mileage rates which are linked to the cost of operating a personal vehicle.  Recent changes have been driven by fuel prices, which are normally measured in October of the prior calendar year.

The new mileage reimbursement rates for 2008 are separated into three categories - business miles, medical / moving, and miles driven in the service of charitable organizations.  The reimbursement rate applies to the broadly defined term "cars" which includes passenger vehicles, vans, pickup trucks, and panel trucks.

Keep in mind that you cannot use the business standard mileage rate listed below for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), if you're planning on claiming a Section 179 deduction for the vehicle, for any vehicle used for hire such as a taxicab, or if more than four vehicles are owned / leased and used simultaneously - as is the case with many fleet operations.

Listed below are the mileage reimbursement rates for the calendar years 2008, 2007 as well as 2006.

2008 Mileage Reimbursement Rates

Starting in January 2008, the standard mileage rate used for personal cars - which also include mini vans, pickup trucks, SUVs, and panel trucks - will be:

• 14.0 cents per mile driven in the service of charitable organizations
• 19.0 cents per mile driven for medical reasons or moving purposes
• 50.5 cents per mile driven for personal cars driven for business purposes

2007 Mileage Reimbursement Rates

From January 2007 to December 2007, the standard mileage rate used for personal cars - which also include mini vans, pickup trucks, SUVs and panel trucks - was:

• 14.0 cents per mile driven in the service of charitable organizations
• 20.0 cents per mile driven for medical reasons or moving purposes
• 48.5 cents per mile driven for personal cars driven for business purposes

2006 Mileage Reimbursement Rates

The mileage reimbursement rates for 2006 are also separated into three categories - business miles, medical / moving, and miles driven in the service of charitable organizations.  The breakdown of the mileage reimbursement rate for 2006 included:

• 14.0 cents per mile driven in the service of charitable organizations
• 18.0 cents per mile driven for medical reasons or moving purposes
• 44.5 cents per mile driven for business purposes

You might notice that the rate of 44.5 cents per mile is lower than the 48.5 cents per mile rate that was in effect for the later portion of 2005.  Once again, the rate for 2006 reflected changes in gasoline prices.

Normally the mileage reimbursement rate in a given year is fixed for the entire year; however, in September 2005 the IRS make a one-time adjustment to the 2005 rate to reflect the steep increase in gasoline prices.  So for the last four months of 2005, the rate stood at 48.5 cents per mile driven.

Katrina-Related Miles

Congress also took some unusual steps to provide for a special reimbursement and tax deduction rate for miles driven in support of Hurricane Katrina relief efforts.  The table below outlines the mileage reimbursement rate that applies only to charity or relief efforts involving Katrina.

Katrina Mileage Reimbursement Rate

Calculating the Mileage Reimbursement Rate

The mileage rate for charitable work is set by statute.  The calculation of mileage reimbursement rates in 2007 are based on a study conducted by Runzheimer International under contract with the IRS.

The standard mileage rates for business, medical, and moving purposes are based on an annual study of the fixed and variable costs of operating an automobile.  The factors used by Runzheimer to determine the mileage reimbursement rate for any given year include both fixed and variable operating costs.  Such costs would typically include car insurance, expenses associated with wear and tear, consumables such as gasoline, and characteristics of a car such as miles per gallon or fuel economy.

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