IRS Raises Standard Mileage Reimbursement Rate for 2024

Cities that use the IRS rate to reimburse employees and elected officials for mileage should know that the IRS raised the standard mileage reimbursement rate from 65.5 cents to 67 cents per mile, effective Jan. 1, 2024. Employers can find the official rates in IRS Notice 2024-08.

Motus, a mobile workforce management software firm, has advised the IRS for more than 40 years about trends in business driving and helped form the annual rate, which is the amount an individual can deduct for business vehicle expenses. Motus stated that this mileage rate increase comes despite the recent decrease in gas prices, which have dropped more than 20% since the summer of 2022. Motus CEO Phong Nguyen noted that vehicle acquisition costs have increased as well as vehicle depreciation accelerating, therefore the overall cost of vehicle ownership has risen. This, along with other factors, has contributed to increased driving costs, which resulted in the IRS raising the mileage rate.

The Commonwealth of Kentucky mileage rate for Jan. 1, 2024, through March 31, 2024, has been set at 43 cents per mile. The fourth-quarter rate was 46 cents per mile. The Commonwealth of Kentucky Finance and Administration Cabinet provides new rates on Jan. 1, April 1, July 1, and Oct. 1 of each year. The commonwealth’s reimbursement rate is determined using the American Automobile Association Daily Fuel Gauge Report for Kentucky for regular unleaded gasoline.

Cities can use the Commonwealth of Kentucky or the IRS rate in their reimbursement policies. According to KRS 64.710, cities cannot provide a lump sum expense account for the personal use of a vehicle or any other personal or official expense unless the allowance is provided by statute or approved by the General Assembly. This applies not only to vehicles but also to meals, uniforms, and other related expenses.

Cities should make sure their travel and expense reimbursement policies comply with state law and IRS requirements. Fringe benefits can be used to attract and retain employees; however, it is important to note that many of these benefits are subject to taxation. Always err on the side of caution and remember that a fringe benefit is taxable unless the law specifically excludes it. The IRS publishes a Local Government Fringe Benefit Guide each year to assist local governments in navigating this difficult area. The comprehensive guide covers the requirements for expenses related to travel, meals, lodging, uniforms, equipment, take-home vehicles, and volunteers, as well as many other areas. Cities should also work with their CPA or local auditor to answer any specific questions on processing fringe benefits for their employees. Failure to comply with the law may subject the employer to penalties.

For sample travel policies or more information on this or any personnel-related matters, contact KLC Personnel Services Attorney Michael Simon.