The Internal Revenue Service today issued the 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
- 18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
- 14 cents per mile driven in service of charitable organizations.
The business mileage rate and the medical and moving expense rates each increased 1 cent per mile from the rates for 2017. The charitable rate is set by statute and remains unchanged.
The mileage rate may be used to compute the amount to reimburse employees who are using their own cars for business purposes. It may also be used by employers that elect to use the "cents-per-mile" valuation method for purposes of determining the amount that needs to be imputed to an employee's income for personal use of certain company-owned or leased nonluxury vehicles.
Finally, for purposes of computing the allowance under a fixed and variable rate (FAVR) plan, the standard automobile cost may not exceed $27,300 in 2018, down $600 from 2017. A FAVR allowance uses a flat rate or stated schedule that combines periodic fixed and variable rate payments, and it relieves employees of the need to keep a record of their actual expenses (see The Payroll Source®, §3.3-5).
Because of the 1 cent increase in the business standard mileage rate, employers reimbursing employees at the 2017 rate need to be mindful of the rate change. Employers should make sure they change to the 2018 rate for all affected travel on or after January 1, 2018. And remember that business miles driven in December 2017 that show up on an employee's expense report in 2018 are governed by the rules applicable to the corresponding 2017 mileage rate.
