Guest Article

(From the December 13, 2010 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

After Two Years of Decline IRS Increases Standard Mileage Rates

Finding that the costs of operating an automobile have increased, the IRS announced that higher optional standard mileage rates will go into effect on January 1, 2011.

As announced in Notice 2010-88, for 2011 the rates used to calculate the deductible costs of using an automobile for business purposes, to obtain medical care, or as part of a move for which expenses are deductible, will increase as follows:

The increase for 2011 follows two earlier years of decline, in 2009 and 2010. The Notice also includes a request for comments on whether taxpayers should be permitted to use the business standard mileage rate for automobiles used in fleet operations.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business purposes in lieu of tracking actual costs. The rate is also used as a benchmark by many employers to reimburse employees for their work-related mileage. (See Revenue Procedure 2010-51 which sets forth the rules for using the optional standard mileage rates.)

The new rates will apply to deductible transportation expenses that are paid or incurred for business, medical or moving purposes on or after January 1, 2011 - and to mileage allowances or reimbursements that are paid to an employee or charitable volunteer after January 1, 2011 with respect to transportation expenses which are paid or incurred after that date.

The mileage rate for charitable contributions is set by statute, not the IRS, and remains unchanged at 14 cents per mile.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2010, Deloitte.