The IRS establishes annual standard mileage rates that can be used to calculate the deductible cost of operating automobiles for business, charity, medical, or moving purposes.
The standard mileage rate for business use is calculated based on the fixed and variable costs of operating an automobile. Effective January 1, 2024, rates have been updated to
- 67 cents per mile for business use,
- 21 cents per mile for service to charitable organizations, and
- 14 cents per mile for medical or moving purposes for qualified active-duty members of the Armed Forces.
Business use is the only rate to see an increase over the 2023 amount. The charitable service rates remain unchanged, while the rate for medical or moving purposes of active-duty members decreased. Taxpayers can opt to calculate their actual expenses rather than utilize IRS-set standard rates. Before the Tax Cuts and Jobs Acts, taxpayers could claim a miscellaneous itemized deduction for unreimbursed employee travel expenses when filing taxes. That ability has been suspended for most employees as a result of the legislation.
Business owners with employees driving personal vehicles for business should understand the importance of implementing precautionary measures to minimize potential liabilities. If an employee experiences a collision while driving for company purposes, the employer could be on the line. Consider adding a policy in your employee handbook that iterates if an employee is driving a personal vehicle for business use, the employee is responsible for having adequate personal auto insurance. Outline what constitutes authorized personal vehicle use and how to request mileage reimbursement. Safe driving guidelines should also be established. Protocols like always using turn signals, maintaining a safe distance between vehicles, following speed limits and other traffic laws, and adjusting driving techniques for inclement weather can set drivers up for safe and accident-free trips.
Additionally, employers should ensure their general liability/ commercial auto coverage is sufficient. In the event an auto collision results in a legal battle, good general liability coverage offers financial protection. Contact Bukaty Companies Property and Casualty experts to discuss updating or creating your drivers policy.