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Effective January 1, 2011, the IRS increased the accepted mileage deduction for business use of a motor vehicle from 50 cents to 51 cents per mile. Employers may deduct as a business expense the full amount of any reimbursement equal to or less than this IRS rate. However, the IRS considers reimbursement amounts in excess of the 51-cent limit “wages” that are subject to taxation.
Those who are self-employed can deduct their business miles using the standard mileage rate or by calculating actual costs. To use the standard mileage rate, it must be applied in the first year the vehicle is used for business.
There are other, lower rates for medical, moving and charitable transportation.
For example, injured California workers receiving workers’ compensation benefits can also use the IRS-prescribed 19 cent/mile rate when requesting reimbursement for miles driven to and from medical appointments, pharmacies and any other locations related to diagnosis and treatment of the job-related injury.
For further details on the rules, an employer should consult a tax lawyer or accountant. Of course, business owners planning to change their companies’ reimbursement rate should be sure to notify their employees.
If you are an employer facing possible litigation, or have an employee issue on which you need immediate guidance, call us to set up a consultation, or submit your message.
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