The standard mileage reimbursement rate for employees who use their own cars for business purposes will increase from 48.5¢ per mile in 2007 to 50.5¢ per mile in 2008, the Internal Revenue Service announced. Each year, the IRS issues standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Employers who use the IRS standard rate to reimburse employees may deduct the reimbursement as a business expense. If employers use the approved rate (or a lower rate), the IRS considers that requirements to substantiate and adequately account for the expense are satisfied without extensive documentation of actual expenses.
As of January 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
- 50.5¢ per mile for business miles driven
- 19¢ per mile driven for medical or moving purposes
- 14¢ per mile driven in service of charitable organizations
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The IRS noted that a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire, or for more than four vehicles used simultaneously.