What is the Federal Mileage Rate 2024 and Why It is Crucial to Consider It?

October 10, 2024

Knowing the federal mileage rate 2024 is crucial for every individual who uses a personal vehicle for work-related purposes, whether it can be business, charity or medical. The rate variable changes from year to year in accordance with economic factors, fuel costs, and vehicle maintenance costs. Both businesses and individuals can benefit from tracking and implementing existing mileage rates in the employ-employer negotiations. It is a subtle way of taking care of the employee and, therefore, helps businesses to perform better.
Let’s take a closer look at 2024 federal mileage rate, what it looks like compared to previous years, how it affects taxes, what is the calculation and claiming method, how you can maximize it, and what alternatives exist if you don’t find the Irs rate suitable for you.

What is the federal mileage rate 2024?

Federal mileage rate 2024 is a standard rate set by the IRS; It is 67 cents per mile. It is up to 1,5 cents from 2023. They issued a boosted rate for business purposes. The rate applies to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles. The rate varies due to the different purposes:

Medical or moving purposes- 21 cents ( it decreases by 1 cent from 2023)
Charitable organizations – 14 cents (it remains unchanged from 2023)

You can choose between two major methods for deductible car expenses: the standard mileage rate method and the actual expenses method. If you want to use the standard mileage rate method, you should choose it in the first year the car is used for business. ,in the following year you can choose between these two, which you think is more suitable for you.
Actual expansion method usage requests a more complex approach for calculating, unlike the usage standard mileage rate. It would help if you calculated the cost of the overall operation of the vehicle in terms of gas, oil, maintenance, repairs, tires, insurance, registration fees, licenses, and depreciation. You need more detailed record-keeping if you pick that method. However, it is worthwhile if you think that the actual cost of your vehicle is high. You get a higher reimbursement than you would get solely based on the standard rate.
One of the most comforting aspects of Irs mileage reimbursement is that it’s not considered taxable income, as long as it’s paid the actual amount. This means that you can enjoy the full benefit of the reimbursement without worrying about its impact on your tax liability. In the following paragraph, we’ll delve into how the 2024 federal mileage rate affects your taxes.

How mileage rate affects on taxes?

Federal mileage rate plays an important role in the taxpaying experience. It can lower the amount of tax you should pay, or it may become non-taxable income for individuals who use personal vehicles for business, medical, or charitable purposes.
If the business use federal mileage rate 2024, therefore pay the amount based on an accountable plan, it is tax-free. However, if a business sets its own rate or chooses to pay its employees otherwise, the excess amount is taxable. For example, if the employer reimbursed 70 cents instead of 67, it means that 3 cents is taxable income. If an employer drives 500 miles for work, the amount reimbursed equals 350$ (500×70 cents ), and 3 cents per mile over the IRS rate (15$ in this case) is taxable income.

How do I calculate and claim my mileage reimbursement?

To calculate mileage reimbursement, you should follow these steps:

Track your mileage data. Accurate mileage information is a decisive factor in correct calculation. The first thing you should do is to ensure that your odometer counts miles correctly and it works well. Additionally, you can use third-party tools and pieces of advanced technology to track your miles effectively. You can use the traditional method of keeping notes about mileage. However, mobile apps can be a better choice when it comes to convenience and comfort.
Find the IRS rate. The standard rate changes annually. So, keep that in mind: the higher the rate becomes, the higher the reimbursement you get for the business miles you have traveled throughout the year.
Make calculations. Let’s say you drive 3000 miles for business purposes throughout the year. 2024 federal mileage rate is 67 cents. Your reimbursement would be 3000X0,67$=2,010$

The same method of calculation will apply for charity and medical/moving purposes. Let’s say 3000 miles as an example again; charitable organizations have to reimburse 3000 X 0,14$=420$, and medical/moving employees get a reimbursement of 3000 X 0,21$=630$.
As you can see, the calculation is straightforward. With accurate data and updated information regarding the IRS rate, you can easily calculate your mileage reimbursement.
Aside from calculating compensation based on federal mileage rate 2024 , there are several alternative methods of getting reimbursement. In the following paragraph, we will discuss these options in greater detail, giving you the power to choose the method that best suits your needs.

What alternative methods exist and is it worth to agree on them as an employee?

If you are an employee and use your vehicles for business purposes, you are the one who can receive compensation from your employers. This compensation can be calculated based on 2024 federal mileage rate as well as alternative methods (some of the methods are worthwhile to agree on) . Those alternative methods of reimbursing your traveled miles are as follows:

Actual expenses method – you should have a detailed log of not only mileage but also you should track the vehicle’s operating costs, including insurance, fuel, repairs, tires, registration fees, licenses, and depreciation. If you want to receive fair compensation from the business owner, you should provide accurate records. So, you should be ready to make a considerable effort.
Mileage allowance – It is one of the favorite types of reimbursement because of its simplicity for business owners. It is a fixed amount of money an employer pays monthly to employees. If you choose this method for its simplicity, you risk being underpaid, while employers risk overpaying. Each scenario is bad for one or another. Unlike using federal mileage rate 2024 for reimbursemet, the mileage allowance method doesn’t respond to the criteria of non-taxable reimbursing and includes risks , so think twice before choosing it.
FAVR (Fixed and variable rate) – as the name suggest, it is a combination of fixed costs (depreciation, insurance, lisence and registration fees) with variable costs ( gas, repairs, tire/oil change, car wash). The method is very fair and logical. Here are a steps you should take:
1. Determine the fixed costs:
Let’s say, depreciation costs $200 per month
Insurance: $150 per month
Registration and License Fees: $20 per month
Total Fixed Costs: $200 (Depreciation) + $150 (Insurance) + $20 (Registration) = $370 per month
2. Determine the variable costs:
Let’s say Fuel: $0.13 per mile
Maintenance and Repairs: $0.07 per mile
Tires: $0.02 per mile
Total Variable Costs:
$0.13 (Fuel) + $0.07 (Maintenance) + $0.02 (Tires) = $0.22 per mile
3. Calculate reimbursement:
Let’s say you drive 2000 miles in a month for work.
Fixed cost ($370) remains untouchable since it is fixed.
Variable reimbursement cost is: 2000 X $0.22 per mile = $440
4. Add fixed and variable costs:
$370 + $440= $810
Based on this data, you will get $810 per month as an employee for using your vehicle for your company. The calculation is straightforward, but the result can’t be objective without accurate calculations of each aspect, especially when it comes to variable costs.

If tracking so much data is overwhelming, you can still negotiate with your employer to pay based on the 2024 federal mileage rate. Trust me, the simplicity of this method will also be attractive to your employer.

Do third-party car devices affect my reimbursement?

The short answer is yes. If you use the third-party tool for testing purposes, make sure to notify your employer about it. It is ultimately a must-have if the device will mess up with the mileage data of the vehicle. Whether you get compensated solely based on the federal mileage rate 2024 or any other alternative method, if you are not cautious, you miss the opportunity to get adequate deductions.
While you’re free to use any legal devices you wish, it’s important to remember that notifying your employer is a reasonable step when you use your vehicle for business purposes. You may be allowed to use such devices if you use other mileage-tracking tools to ensure precise data. As we’ve highlighted, mileage data is a crucial factor in making accurate calculations.
One of the advanced devices you love to use is a mileage blocker, it is an extraordinary piece of technology.

Mileage blocker

Mileage blocker is produced in Germany with premium-quality components. It halts the mileage recording process from all control units. It comes with the mobile application, so it promises comfort and convenience. Apart from that, the tool is user-friendly, which means you can install it on your own. The mileage blocker is available on the Superkilometer Filter, and you can order the device for almost any maker and model. If you have additional questions, feel free to ask, the customer center and support team are ready to help.
Please consider that device usage is legal only in a controlled environment. Manufacturers do not recommend utilizing the blocker on the public road. As we already mentioned, it can interrupt making accurate calculations of mileage deductions according to 2024 federal mileage rate.

Takeaway

Ultimately, the federal mileage rate 2024 is a key consideration for employees, self-employed individuals, and business owners who use personal vehicles for business purposes. It’s not just a number, but a crucial factor in deciding on the most suitable reimbursing method. While using the standard mileage rate is a straightforward way of calculating compensation, other options may be more beneficial for some individuals.