Federal Mileage Rate
Title: Deciphering the Federal Mileage Rate
Understanding the Federal Mileage Rate
The federal mileage rate is the sum an employee can subtract from their federal income taxes for operating a personal vehicle for qualified business, charitable, medical, or moving purposes. The Internal Revenue Service (IRS) determines this rate annually, considering variables like fuel, maintenance, licensing, and insurance costs associated with vehicle ownership.
Company Reimbursement and Legal Requirements
While not legally mandated, reimbursing employees for personal vehicle use on work-related tasks is a common practice. However, companies must adhere to certain legal requirements:
- Mileage reimbursements are only for deductible business expenses.
- Claims must be supported by detailed employer records.
- Employees must return any excess reimbursement.
- Employers can reimburse below the federal rate but must cover expenses adequately to prevent wages falling below minimum wage.
Coverage of Federal Mileage Rates
Federal mileage rates encompass both variable and fixed vehicle operation costs. Variable costs include fuel, oil, tire wear, maintenance, and repairs, while fixed costs comprise insurance, registration, lease payments, and depreciation. Excluded are parking costs, toll fees, personal vehicle use, and company car usage.
Current Federal Mileage Rates (2022)
- 58.5 cents per mile for business use
- 18 cents per mile for medical or moving purposes
- 14 cents per mile for charitable organizations
Calculating Federal Mileage Reimbursement
To calculate reimbursement, multiply qualified miles by the applicable rate. For instance, if an employee travels 39 miles for business purposes at the rate of 58.5 cents per mile, the reimbursement would be $22.82.
Odometer Readings and IRS Requirements
While employers can request odometer readings for each trip, the IRS doesn’t mandate separate readings for every business trip. Odometer readings are required at the start and end of each year or when a new vehicle is used. Employees must keep records of mileage, date, destination, and purpose when claiming reimbursements on federal income taxes.