The Internal Revenue Service (IRS) recently released its inflation-adjusted standard mileage allowances for 2018, as well as maximum vehicle value thresholds to be used in calculating fixed and variable rate (FAVR) allowances.
For all miles of business use, the standard mileage rate for transportation or travel expenses is 54.5 cents per mile (up slightly from 53.5 cents in 2017), according to IRS Notice 2018-03. The standard rate is 14 cents per mile (same as last year) if an automobile is used to render gratuitous services to a charitable organization, or 18 cents if used for medical care or a deductible move (a 1-cent increase from 2017).
For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 22 cents per mile for 2014, 24 cents per mile for 2015, 24 cents per mile for 2016, 25 cents per mile for 2017, and 25 cents per mile for 2018.
The rate revisions reflect fluctuations in costs related to driving, such as gasoline and auto insurance, as well as changes in vehicles’ depreciation rate.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than the standard mileage rates. Revenue Procedure (Rev. Proc.) 2010-51 provides the rules for computing the deductible costs of operating an automobile for business, charitable, medical, or relocation expenses; and for substantiating the expenses under Code Section 274(d) and Treas. Reg. §1.274-5.
The FAVR allowances apply to so-called “Runzheimer plans” for reimbursing employees’ use of their own or leased vehicles to conduct company business. Named for the company that markets many of these plans, Runzheimer plans allow employers to reimburse employees for the use of their cars with a fixed periodic payment, plus a periodic cents-per-mile allowance.
For purposes of computing the allowance under a FAVR plan, the maximum allowable cost in 2018 is $27,300 for cars (down from $27,900 in 2017) and $31,000 for trucks and vans (down from $31,300).