The IRS issues its Standard Mileage Reimbursement Rate each year. The rate determines the amount that can be used as a deduction for business travel and serves as a guideline for employers who reimburse their employees for the same. It reflects not only fuel costs, but also factors in average wear and tear on a vehicle.
Beginning on January 1, 2014, the rate will change to 56 cents per business mile driven, a half cent lower than the 2013 rate. The rate for medical or moving expenses will also be reduced a half cent to 23.5 cents per mile. The rate for charitable purposes remains at 14 cents per mile.
While there are generally no Pennsylvania laws requiring employers to use the IRS rate, there are tax advantages for doing so. The IRS will deem employers who make qualifying reimbursements up to 56 cents per mile as meeting their accounting requirements, thus no income reporting or withholding is required for those reimbursements. However, employers need to make sure that their employees have provided adequate proof that the mileage was strictly for business use. Qualifying employees who are not reimbursed for their business mileage will be able to deduct 56 cents per mile on their individual tax returns.
As an interesting side note, AAA’s website offers a gas price tracker ("AAA Daily Fuel Gauge Report") that can be used to monitor gas price averages and compare averages in different geographical areas. This tool can be helpful in analyzing fuel expenses against reimbursement rates and keeping track of the fluctuation of gas prices.
According to the tracker, as of the date of this post, the national average for regular gas is $3.259 per gallon. Pennsylvania’s average is higher at $3.407 per gallon. At $3.395, the average in Lancaster County is also higher than the national average, but a fraction lower than the state average.