2018 standard auto mileage rate increases 1¢ per mile

The IRS’ standard mileage rate, which you can use to reimburse employees who drive their own cars on business, or to value employees’ personal use of moderately priced company vehicles that are first made available to employees this year, increases to 54.5¢ a mile for 2018, up one penny from the 2017 rate. Warning: The IRS has yet to set the cost for moderately priced company vehicles for 2018, but for 2017, those amounts were $15,900 for cars and $17,800 for SUVs. (Notice 2018-03, IRB 2018-2)

Road scholar. The IRS’ standard mileage rate is a ceiling; if you want to pay or reimburse employees who drive their own cars on business at a lower per-mile rate, you may do so. Key tax advantage: If your rate doesn’t exceed 54.5¢ a mile, and employees record their business miles, where they drove, whom they saw and the business they conducted, your payments are tax free. Employees can download an app to their smartphones that will take care of a lot of the tracking.

Payments exceeding 54.5¢ a mile, excess amounts employees don’t return and amounts paid for miles for which employees don’t provide accurate records, are taxable.

IF IT’S PERSONAL: Employees’ personal use of company vehicles is taxable. If a vehicle’s value exceeds the IRS’ modest limits, you must use either the general valuation method or lease valuation method to value employees’ personal use.