The Standard Mileage Reimbursement Rate for Government Contractors

At a glance:

• The main takeaway: Mileage reimbursement rates are set by the IRS in guidance from the General Services Administration (GSA), Federal Travel Regulation (FTR) and Federal Acquisition Regulations (FAR) and are issued at the beginning of the year. 
• The impact on your business: Knowing what mileage reimbursement rates apply to you and your business can help ensure you are fairly compensated for using personal vehicles during work tasks. 
• Next steps: Schedule a consultation with Aprio’s Government Contracting specialists for help identifying more opportunities for reducing your tax burden.

Schedule a consultation with Aprio’s Government Contracting team today.

Mileage reimbursement is a vital component of business and government activities, ensuring that employees and officials are fairly compensated for using their personal vehicles for work-related purposes. The federal mileage reimbursement rate is the standard guideline used to calculate the allowable amount for mileage expenses. In this article, we will delve into the concept of the federal mileage reimbursement rate, its significance and the federal regulations that govern its implementation.

Understanding the Federal Mileage Reimbursement Rate

The federal mileage reimbursement rate, also known as the standard mileage rate, is the established amount set by the Internal Revenue Service (IRS) for calculating allowable mileage expenses. This rate, which covers fuel, maintenance, depreciation and insurance, is subject to annual adjustments and serves as a consistent guideline for reimbursement. The mileage reimbursement rate is subject to change each year and is typically announced by the IRS towards the end of the calendar year. Periodically mileage rates are adjusted for large variations in gas prices. Such an adjustment occurred in 2022 effective for the second half of the year.

For 2024, the standard mileage rate has been established at 67 cents per mile (was 65.5 cents per mile in 2023) for business use, 21 cents per mile (22 cents in 2023) for medical or moving purposes for qualified active-duty members of the Armed Forces and 14 cents per mile for charitable organizations (no change from 2023).

The Purpose and Significance

The federal mileage reimbursement rate serves several important purposes:

Consistency: The IRS establishes a standard rate to ensure uniformity in mileage reimbursement across different industries and sectors, thereby averting confusion and lessening administrative complexities.

Fair Compensation: Workers and government personnel receive equitable compensation for using their personal vehicles during work tasks, promoting productivity and effectiveness.

Tax Deduction: Businesses can utilize the mileage reimbursement rate to deduct taxes, thereby lowering their total tax obligations.

Applicable Federal Regulation References

• IRS Publication 463 (Travel, Gift and Car Expenses): This publication offers thorough guidance on the regulations and rules concerning car expense deductions, such as mileage reimbursement. It explains the standard mileage rate and outlines the record-keeping obligations necessary to support mileage deductions.
• Internal Revenue Code (IRC) Section 162(a): This provision of the IRS Code specifies that ordinary and essential business expenses, including mileage costs for business purposes, are eligible for deduction.
• General Services Administration (GSA) Regulation, 41 CFR Part 301-10: This regulation applies to federal employees and establishes the mileage reimbursement rate for government officials and employees using their personal vehicles for official travel. The GSA frequently adopts the IRS standard mileage rate for this purpose.
• Federal Travel Regulation (FTR), 41 CFR Part 300-70: The FTR provides specific guidance for federal employees regarding travel-related expenses, including mileage reimbursement.
• Federal Acquisition Regulation (FAR), 48 CFR Part 31: For government contractors, the FAR establishes the rules for allowable costs, which may include mileage expenses under certain circumstances.

The federal mileage reimbursement rate plays a pivotal role in contemporary business and government operations. It establishes a uniform benchmark for calculating mileage expenses, ensuring equitable compensation for employees and government officials while enhancing efficiency and productivity. It is essential for businesses and individuals to acquaint themselves with pertinent federal regulations, including IRS Publication 463 and the GSA Regulation, to remain compliant and leverage tax benefits related to mileage reimbursement. Seeking advice from tax professionals or legal experts is advisable to ensure full compliance with these regulations and optimize eligible deductions.

Schedule a consultation with Aprio’s Government Contracting team today to learn how to stay compliant with these regulations and how to optimize your business tax deductions.

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