IRS Raises Standard Mileage Rate for 2013

IRS Raises Standard Mileage Rate for 2013


December 20, 2012

The Internal Revenue Service (IRS) has raised the standard mileage rate for calculating the deductible costs of operating an automobile for business purposes.

Effective January 1, 2013, the standard mileage rate is 56.5 cents per mile, up from 55.5 cents per mile in 2012. Use of the IRS standard mileage rate is optional.

Background:

Many employers reimburse employees for use of their personal vehicles for business purposes. An employer may deduct the reimbursements as a business expense and exclude them from employees gross income if the reimbursements are substantiated. In general, the use of the standard mileage rate is treated as the equivalent of substantiation if the employer’s reimbursement or allowance arrangement meets all of the following:

  1. The expenses must have a business connection that the individual paid or incurred while performing services as an employee of the employer;
  2. The employee must adequately account to the employer for the expenses (such as keeping a log of business miles driven) within a reasonable period of time; and
  3. Any excess reimbursement or allowance must be returned within a reasonable period of time.

If the arrangement fails to meet one or more of the three requirements, all amounts paid under the arrangement are included in the employee’s gross income, must be reported as wages or compensation on the employee’s Form W-2, and are subject to the withholding and payment of employment taxes.

For employers that choose not to use the IRS standard mileage rate, another option is to calculate the actual costs of using a personal vehicle for business purposes.