Mileage Reimbursement Rates for 2024

This is a subThe Internal Revenue Service (IRS) has announced the new standard mileage rates for 2024, reflecting changes in the costs associated with operating an automobile. These rates are crucial for individuals and businesses to understand as they affect the calculation of deductible costs for automobile use for business, charitable, medical, or moving purposes.

Effective from January 1, 2024, the IRS has set the following standard mileage rates:

1. Business Use: The rate is increased to 67 cents per mile, up by 1.5 cents from the 2023 rate. This increment is noteworthy as it reflects the changing economic factors influencing the cost of operating a vehicle for business purposes.

2. Medical or Moving Purposes for Active-Duty Armed Forces: There is a slight decrease in this category, with the new rate being 21 cents per mile, down 1 cent from the previous year. This rate specifically applies to qualified active-duty members of the Armed Forces.

3. Charitable Organizations: The rate remains steady at 14 cents per mile. This consistency is due to the rate being set by statute, hence it does not fluctuate annually like the other categories.

It's important to note that these rates apply not only to traditional gasoline and diesel-powered vehicles but also to electric and hybrid-electric automobiles.

Limitations and Restrictions

The Tax Cuts and Jobs Act has introduced limitations that taxpayers need to be aware of. Miscellaneous itemized deductions for unreimbursed employee travel expenses are no longer claimable. Moreover, deductions for moving expenses are restricted to members of the Armed Forces on active duty who are relocating under orders to a permanent change of station.

Options for Taxpayers

Taxpayers retain the choice between using the standard mileage rates and calculating the actual costs of using their vehicles. However, if opting for the standard mileage rate, it's generally required to be used in the vehicle's first year of business use. Subsequently, taxpayers can choose between the standard rate and actual expenses. For leased vehicles, if the standard mileage rate is selected, it must be used for the entire lease period, including renewals. For more information regarding tracking, check out our recent article Mileage vs Actual Expense Tracking.

Additional Details in Notice 2024-08

For comprehensive information, Notice 2024-08PDF is essential. This document includes the optional 2024 standard mileage rates and details the maximum automobile cost for calculating the allowance under a fixed and variable rate (FAVR) plan. Additionally, it specifies the maximum fair market value for employer-provided automobiles that are available for personal use, guiding employers on the fleet-average valuation rule or the vehicle cents-per-mile valuation rule for the 2024 calendar year.

The IRS's update on mileage rates for 2024 is a critical adjustment reflecting the changing economic landscape and the costs associated with vehicle operation. These changes impact a broad spectrum of taxpayers, from businesses to individuals serving in the Armed Forces. Understanding these rates, along with the associated regulations and options, is vital for effective financial planning and compliance in the upcoming year.