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IRS Issues New Mileage Reimbursement Rates for 2017

California requires employers to reimburse employees for expenses associated with using a personal automobile for business purposes. As an alternative to manually calculating such expenses, the Department of Labor Standards Enforcement has long taken the position that reimbursement at the optional standard mileage rates established by the IRS is presumably sufficient to cover all expenses associated with employee use of a personal automobile.

Yesterday, the IRS issued the optional standard mileage rates for the use of a car (also vans, pickups or panel trucks), which will become effective January 1, 2017:

  • 53.5 cents per mile for business miles driven (down from 54 cents in 2016).

  • 17 cents per mile driven for medical or moving purposes (down from 19 cents in 2016).

  • 14 cents per mile driven in service of charitable organizations (same as 2016).

If an employer's reimbursement rate does not cover an employee's actual expenses, even if it matches the IRS rate, the employer is obligated to pay the difference. Additionally, employees may calculate the actual costs of their automobile use rather than relying on the employer's rate or IRS standard mileage rates.

The new IRS standard mileage rate for business vehicle use is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The mileage rate for using an automobile for medical or moving purposes is based on the variable costs, such as gas and oil. The mileage rate for charitable purposes is set by federal law. The IRS notice for 2017 Standard Mileage Rates can be found here on the IRS website.

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