IRS Increases Mileage Rates
July 1, 2008
The Internal Revenue Service recently announced an increase in some of the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Important Note: Health FSAs may use the optional standard rate to calculate the reimbursable amount for operating an automobile for medical purposes for miles driven on or after July 1, 2008.
The rate will increase to 58.5 cents per mile for all business miles driven, and 27 cents per mile for all medical expenses, from July 1, 2008, through Dec. 31, 2008. The rate for charitable organizations is set by statute, not the IRS, and remains at 14 cents.
Purpose
Rates 1/1 – 6/30
Rates 7/1 – 12/31
Business
50.5¢
58.5¢
Medical/Moving
19¢
27¢
Charitable
14¢
14¢
Typically, the IRS changes the rates on a calendar year basis. A mid-year change was needed this year due to the rising price of gasoline.
ACTION ITEMS FOR
REIMBURSEMENT PLANS
Check Cafeteria Plan Document and SPD. What do your documents say? If your cafeteria plan document and/or summary plan description reimburses mileage and includes the reimbursable mileage rate, you should amend your documentation.
TPA Reimbursement Programs. If your TPA software calculates reimbursement based upon the old rate, you will need to update your system. Miles driven prior to July 1, 2008, must be reimbursed at 19 cents per mile; miles driven on or after July 1, 2008, are reimbursable at 27 cents per mile.
Communication. You should communicate to your employees that the rate has increased effective July 1, 2008.
Note: Providing this communication may raise awareness that mileage is a type of reimbursable expense for health FSA purposes.
Please let us know if you have questions regarding mileage and/or if you would like our assistance with any of the foregoing action items.
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The information contained in this ALERT is intended for general information purposes only and does not constitute legal advice relative to a specific situation.