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Is the IRS mileage rate the best rate to pay for mileage expenses?
Are there any other government mileage rates that companies use to determine pay for mileage expenses, or do most just follow the IRS rate? Also, are you able to pay out for mileage, but at a lower rate than what the IRS says?
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2 Answers
The IRS sets a rate that is used for determining the deductibility of business use for your personal vehicle. Many companies will use that rate when reimbursing their employees for usage of their own car. Employers are not mandated to reimburse for mileage. The IRS does permit an employer to reimburse for mileage expense up to a specific amount tax free. Typically this rate is adjusted annually, except in the situations of agressively increasing fuel costs.
I have seen companies reimburse less than the IRS rate. But in the long run, I think it is fairer to use the IRS rate than not. The IRS is not generous in their calculation so for most people driving relatively new cars, this reimbursement may not cover all their costs. When a person just drives occasionally, there is not much harm in a low reimbursement. But for a frequent driver that is actually shortening the life of their car by business use, it is best to at least pay what the IRS allows. The IRS rule is for the whole country, so in high cost areas such as California, it is especially unfair to pay less than the IRS rate.
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