Compliance

Title

Business Standard Mileage Rate Increases to 54.5 cents in 2018

The IRS has announced that the business standard mileage rate for transportation expenses paid or incurred beginning January 1, 2018, will be 54.5 cents per mile, up 1 cent from the 53.5 cents-per-mile rate in effect during 2017 [Notice 2018-03, released 12-14-17].

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 (see The Payroll Source®, §3.2-2).

In addition, the 2018 standard rate for miles driven for medical or moving purposes will increase to 18 cents per mile, up from the 17 cents-per-mile rate in effect during 2017. Note, however, that the standard mileage rate for operating a passenger car for charitable purposes, which is set by law, will stay at 14 cents per mile in 2018.

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).

REMINDER – 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. The same holds true for moving expense miles unless the proposed Tax Cuts and Jobs Act includes the elimination of job-related moving expenses as a tax-free fringe benefit, effective January 1, 2018.