IRS Mileage Rate Change in 2024: What’s to Come

Update, December 14th 2023: the IRS has announced their new 2024 mileage rates.

• Business use is 67¢ per mile, up from 65.5¢ in 2023.
• Medical or moving purposes: 21 cents per mile.
• Service of charitable organizations: unchanged at 14 cents per mile.

The maximum standard vehicle cost allowance for FAVR and fleet programs has also been announced.

• The maximum standard vehicle cost is The maximum standard automobile cost for 2024 is $62,000. This is up from $60,800 in 2023.

See our full article and announcement of the 2024 IRS rate:

IRS Announces 2024 Mileage Rates (67¢) | Cardata

Introduction

As we gear up for the new year, businesses and individuals alike are bracing themselves for changes on various fronts. One notable change that’s on the horizon is the upcoming shift in the IRS mileage rate in 2024. For those who rely on their vehicles for work-related purposes, this alteration carries significant implications. In this blog post, we’ll delve into what the IRS mileage rate is, why it matters, and what we can expect from the impending change in 2024.

Understanding the IRS mileage rate

The IRS mileage rate, officially known as the “standard mileage rate,” is a predetermined amount set by the Internal Revenue Service (IRS) that individuals and businesses can use to calculate the deductible costs of operating a vehicle for business, charitable, medical, or moving purposes. This rate considers various factors, such as fuel costs, vehicle depreciation, insurance, and maintenance expenses.

The standard mileage rate simplifies the process of reimbursing individuals for the use of their personal vehicles for business-related activities. It provides a standardized and straightforward method for calculating deductible expenses, eliminating the need for meticulous record-keeping of individual costs.

Read the full history of the IRS rate.

Why it matters

For many businesses and self-employed individuals, the IRS mileage rate is a crucial factor in determining the financial impact of using personal vehicles for work. It directly affects the amount of deductible expenses that can be claimed on tax returns, thus influencing the overall financial health of these entities.

Individuals who frequently travel for work, medical appointments, or charitable activities may also find the IRS mileage rate to be a significant consideration when managing their personal finances. A higher mileage rate can translate into more substantial deductions, potentially easing the financial burden associated with necessary travel.

Anticipating the Change in 2024

As of December 5th, 2023, the IRS mileage rate change in 2024 has not yet been announced. However, it’s essential to stay informed and keep an eye on official IRS announcements and updates as the new year approaches. The IRS typically releases the upcoming year’s mileage rates towards the end of the preceding year, providing ample time for individuals and businesses to adjust their financial planning accordingly.

Tips for Adapting to the Change

1. Stay informed: regularly check the IRS website or reliable financial news sources for updates on the 2024 mileage rate. Being aware of the changes in a timely manner allows for proactive adjustment to financial plans.

2. Update record-keeping practices: as the mileage rate changes, ensure that your record-keeping practices are aligned with the new rate. Accurate and detailed mileage logs are crucial for maximizing deductible expenses.

3. Consult with a tax professional: if navigating the intricacies of tax deductions feels overwhelming, consider seeking guidance from a tax professional. They can provide personalized advice based on your specific situation and help optimize your deductions.

Past changes in the IRS mileage rate

The IRS mileage rate is a dynamic figure that undergoes adjustments periodically, reflecting fluctuations in the overall economy and the costs associated with vehicle ownership and operation. Traditionally, the IRS revises the standard mileage rate on an annual basis, typically announcing the upcoming year’s rates towards the end of the preceding year. These adjustments, though often marginal, play a crucial role in shaping the financial landscape for businesses and individuals who rely on their vehicles for work-related activities.

Over the years, the rate has experienced subtle shifts, usually within a range of a few cents. However, there have been instances where the changes were more pronounced. Notably, in 2005 and 2008, the IRS implemented adjustments that resulted in increases of up to 8 cents per mile. These larger fluctuations underscore the sensitivity of the standard mileage rate to external economic factors, such as fuel prices and overall inflation.

Moreover, there have been instances where the IRS has updated the mileage rate twice within a single year. This occurred in 2005, 2008, 2011, and most recently in 2022. Such mid-year adjustments are often responses to significant changes in economic conditions or legislative decisions impacting transportation costs. This flexibility in adjusting the rate twice a year demonstrates the IRS’s commitment to keeping the standard mileage rate reflective of the current economic realities, ensuring a fair representation of the true costs associated with vehicle usage for tax deduction purposes.

The IRS mileage rate, Cents per Mile programs, and FAVR

In the realm of mileage reimbursement programs, two prominent models stand out: the IRS mileage rate-based Cents per Mile (CPM) programs and the Fixed and Variable Rate (FAVR) reimbursement programs. The IRS mileage rate-based CPM programs operate on a straightforward premise, offering a fixed amount per mile driven for business purposes. This approach is often favored by occasional drivers or those whose business-related travel is sporadic. 

On the other hand, the FAVR reimbursement programs take a more comprehensive approach, factoring in both fixed and variable costs such as vehicle depreciation, insurance, and maintenance. FAVR is particularly efficient and fair for individuals who find themselves frequently on the road for work. It ensures a more accurate reflection of the actual costs associated with vehicle usage, offering a personalized reimbursement amount that considers the diverse expenses incurred by constant travelers. 

While both reimbursement models have their merits, FAVR’s nuanced approach makes it a preferred choice for those with substantial and consistent business-related travel, promoting fairness and efficiency in reimbursing the true costs of maintaining a vehicle for work purposes.

Conclusion

The upcoming change in the IRS mileage rate in 2024 is a reminder that the financial landscape is ever-evolving. By staying informed and adapting to these changes, individuals and businesses can navigate the road ahead with confidence, ensuring that they make the most of available deductions and maintain financial stability in the face of evolving tax regulations.

Disclaimer: Nothing in this blog post is legal, accounting, or insurance advice. Consult your lawyer, accountant, or insurance agent, and do not rely on the information contained herein for any business or personal financial or legal decision-making. While we strive to be as reliable as possible, we are neither lawyers nor accountants nor agents. For several citations of IRS publications on which we base our blog content ideas, please always consult this article: https://www.cardata.co/blog/IRS-rules-for-mileage-reimbursements. For Cardata’s terms of service, go here: https://www.cardata.co/terms.