You would think, with gas prices so low, that the mileage reimbursement rate wouldn’t go up, but instead would go down, maybe even way down. But it didn’t. It went up one and a half cents per mile to 57.5 cents on January 1st, 2015.
This is because fuel costs only represent one of several factors that go into what the IRS considers when setting the mileage rate. They also consider the cost of owning, leasing, insuring, and maintaining vehicles which, according to research, is rising. The overall costs of driving are going up, even though gas prices have recently gone down.
IRS mileage rates are based on research from Runzheimer International who has been conducting mileage rate research for the IRS for the last 35 years.
“Even when your operational costs are going down — that’s the fuel, the maintenance, the tires, the oil, all of those things — the fixed costs are usually a little bit more as far as the annual cost of the vehicle,” said Cris Robinson, research analysis supervisor with Runzheimer.
What This Means to You
As an employer, you can decide whether or not you want to raise your mileage reimbursement rate from last year and pay more or less than the IRS rate. Ultimately, the decision is up to you. The IRS rate is just a guide. As an employee, you’ll get a bigger tax break on whatever your employer doesn’t reimburse.