On January 1st, 2023, the Internal Revenue Service (IRS) increased the standard mileage rate for paid transportation expenses. The new mileage rate will be 65.5 cents per mile which is up three cents from the second half of 2022. All miles driven for medical or moving purposes will remain at 22 cents per mile, and mileage for charitable purposes will remain at 14 cents per mile. For additional information regarding the updated business standard mileage rate, click here.
Understanding Mileage Reimbursement
In most businesses, employers would provide company cars to salespeople and executives who traveled often for business purposes. The employer would also pay for the car’s expenses, including gas, insurance, and maintenance. Nowadays, if a company doesn’t provide vehicles for their employees, they should reimburse employees’ car expenses with mileage reimbursement. With mileage reimbursement, employees receive a set dollar amount for every mile they drive for business purposes. While reimbursing your employees for using their personal vehicles is not a federal requirement, it’s essential that you adopt such practices to keep your employees from using their savings to fund business expenses.
The following are considered qualified mileage reimbursement costs:
- Business trips
- Off-site meetings with clients and prospective clients
- Running errands for business supplies
- Deliveries
Fortunately, the IRS makes it easy for business owners to determine how much they should be reimbursing their employees. The IRS sets a mileage rate for these costs, which are not taxable to your employees and are a deductible for your business. Should you choose a higher rate, you and your employees pay payroll taxes on the extra amount.
Utilize GMS To Help With These Decisions
While providing your employees with mileage reimbursement isn’t necessary, it’s a way to attract employees and let them know you care about them. When you partner with GMS, you gain access to our fleet management program. This allows business owners to organize and coordinate work vehicles to improve efficiency, reduce costs, and monitor unsafe driving habits. If you’re a small business owner and don’t have a fleet of cars, our HR experts work with you to set up a program so you can reimburse your employees for qualified mileage reimbursement costs. Contact us today to learn more.