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Tuesday, December 7, 2010

IRS Mileage Reimbursement Rate Rises in 2011











IRS Mileage Reimbursement Rate Rises in 2011
Alabama@Work
By: Tommy Eden, Attorney
Effective Jan. 1, 2011, the standard mileage rate employers can use to reimburse employees who drive their owned or leased automobiles for business purposes is 51 cents per mile. This is up from a standard mileage reimbursement rate of 50 cents per mile for 2010. By using the standard mileage rate, employers can eliminate the need for employees to record actual mileage expenses. IRS Announcement below:

IRS Announces 2011 Standard Mileage Rates

IR-2010-119, Dec. 3, 2010
WASHINGTON — The Internal Revenue Service today issued the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
  • 51 cents per mile for business miles driven
  • 19 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Revenue Procedure 2010-51 contains additional details regarding the standard mileage rates.
Common Sense Counsel: following the IRS standard mileage guidance is a much less risky alternative that creating your own reimbursement system that could result in an adverse impact to the employee and employer.

Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com