Corporate mileage rate variations

Here’s some good economic news that got lost in last week’s market tumult: Gasoline prices are lower.

In some areas, including some Austin suburbs, you can get a gallon of gas for less than $3.

But earlier this year, when pump prices were well above $4, the IRS provided a break for folks who must drive to do their business. The standard mileage deduction was increased.

Vehicular business travel conducted since July 1 (and through December) can be deducted at 58.5 cents per mile. Business miles driven between Jan. 1 and June 30 can be deducted at 50.5 cents per mile.

Entrepreneur vs. employee miles: The increased standard mileage rate is a great help to self-employed folks who track and report their business related travel on their tax returns.

But what about employees who also rack up work-related miles? In these cases, employees usually get reimbursed for their automotive efforts in service to the company.

By how much, however, isn’t so clear cut.

Employee inquiries: When the 2008 mileage rate increase was announced, James had some questions. Note that the rate he cites is the pre-July 1 increase.

James wrote:

The recent change in IRS mileage allowances has made me consider my employers use of the mileage rates. Currently, my employer only pays the employees $0.385/mile for legitimate business miles in personal vehicles. When asked about the additional 12 cents, I was told that it was somewhat of a handling charge. I am a MBA graduate but only have an elementary command of tax accounting so I pose it to the professionals: Is this even legal? I am lucky to have a steady job in the economic times are nation is battling. I can’t help but cry foul, especially when gas is $4/gallon.

A similar complaint came from Jason:

I am a private investigator and my boss only pays me 34 cents a mile. Is there a law saying he has to pay the newest mileage rate?

Well, James and Jason, I’m sorry to report that y’all are just plain out of luck when it comes to company mileage reimbursements.

Guideline, not a rule: While the IRS rate is used as a benchmark by many businesses to reimburse their employees for work-related travel, there’s no law requiring the private sector to match the federal rate.

Some states do have laws about mileage reimbursement. Check with your state’s Department of Labor to see if that applies in your case.

But absent a state mileage enforcement mechanism, Jason and James, you’re probably stuck with what your companies will pay for your business driving.

Neither firm is breaking any federal law by choosing to reimburse your mileage at lower rates.

Writing off work costs: Unreimbursed business expenses, be they for travel or items necessary to do your job can be deducted as an itemized expense.

This could include the difference between the rate your company reimburses you for mileage and the IRS standard mileage rate.

There is one big hurdle, though. The business-related costs, considered miscellaneous expenses on Schedule A, must come to more than 2 percent of your adjusted gross income. Get more details in this story.

And if your company’s minuscule mileage reimbursement rate just gets to be too much and you start looking for different work, keep track of those job-hunting costs, too. They also can be counted as miscellaneous expenses and could help you get past the 2 percent deductibility threshold.