IRS increases mileage rate for second half of 2008
June, 2008
Most employers' reimbursement costs for business use of employee's automobiles just went up. Beginning July 1, 2008, the IRS rate for deductibility of business-related auto expenses – which most employers use when reimbursing employees – will increase from 50.5 cents per mile to 58.5 cents per mile. (See official announcement here.)
What This Means For Your Business
Employers in virtually every state are required to reimburse employees for reasonable and necessary business expenses incurred by the employees. Most states presume that auto reimbursements at the IRS rate accurately estimate the employees' costs – fuel, insurance, depreciation, etc. – of using their cars for business purposes, and uphold employer reimbursements calculated at the IRS mileage rate.
(Note, however, that some states, and the IRS, recognize that the mileage rate is not as accurate in some cases, and provide an employee the option of proving, and obtaining reimbursement for, actual costs in excess of the IRS mileage rate – see California Supreme Court clarifies employers' expense reimbursement duties.)
Employers should ensure that their reimbursement procedures reflect the new IRS rate for all business miles driven on and after July 1, 2008. Employers should also let employees who want to prove actual expenses in excess of the IRS rate have an opportunity to do so – and pay the employee whichever figure is higher.
If you have any questions, please contact your Bullivant employment attorney.