IRS Announces Mid-Year Adjustment of Business and Medical Mileage Rates

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June 23, 2011

Due to the increases in the cost of gasoline since establishing the 2011 rates last year, the Internal Revenue Service is increasing mid-year the optional standard mileage rates for computing the deductible cost of operating an automobile for business, medical, and moving expenses. Effective July 1, 2011, the optional standard mileage rates will be 55.5 cents per mile for business transportation, and 23.5 cents per mile for travel relating to medical and moving transportation expenses.
These increased mileage rates apply only to those expenses incurred or paid by a taxpayer on or after July 1, 2011 (and if reimbursed by an employer, reimbursed by the employer on and after that date). Expenses incurred prior to July 1, 2011 (whether reimbursed by the employer before or after that date) are still subject to the old 2011 rates (51 cents for business transportation, 19 cents for medical and moving transportation). The standard mileage rate for the deduction for charitable contributions remains 14 cents per mile.
This increase in mileage rates is relevant to employers that reimburse employees for business transportation based on mileage. While there is no legal requirement that employees be reimbursed at the IRS standard rate, many employers have a policy of doing so. As a reminder, any payments to an employee based on business travel at a rate in excess of the IRS standard rate generally is taxable income to the employee.
If you have questions regarding the above, please contact Mary Ellen Schill, the author of this article, or any of the attorneys in the Employment, Benefits & Labor Relations Practice Group, or the Business Transactions Practice Group of Ruder Ware.

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