IRS Standard Mileage Rates Set to Increase in 2018
Last week, the Internal Revenue Service ("IRS") issued updated standard mileage rates for businesses to use for calculating the costs incurred by employees when driving a car for business purposes. Beginning January 1, 2018, the standard mileage rate will increase to 54.5 cents per mile, up from 53.5 cents in 2017.
As a reminder, California law requires employers to fully reimburse employees for all necessary expenses incurred in discharging their work duties, which includes expenses incurred while driving for business purposes. Use of the IRS standard mileage rate generally satisfies an employer's reimbursement obligation for business-related vehicle expenses. Business-related vehicle expenses include not only gasoline, but wear and tear, repairs, oil, insurance and more.
However, the use of the IRS standard mileage rate is optional, and other reimbursement methods can be utilized. For example, an employee can choose to calculate the actual costs of using their vehicle rather than the standard mileage rate. Additionally, the California Supreme Court has held that an employer can reimburse for vehicle expenses via a lump-sum payment. Employers should be warned however that if they utilize the IRS mileage rate or a lump-sum payment, and the employee can show that the chosen method does not cover all actual expenses incurred, the employer will be liable for the difference.
A copy of the IRS announcement can be found here (LINK)
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Sincerely, Richard S. Rosenberg Katherine A. Hren Justin T. Youngs Ballard Rosenberg Golper & Savitt, LLP