While the 2024 IRS standard business mileage rate hasn’t yet been announced, it’s certainly worth discussing what the rate might be, how it might affect you or your business, and where the IRS standard mileage rate comes from. Using the last few years as precedent, the IRS will likely announce next year’s standard mileage rate in mid-December 2024.
What Does the IRS Standard Mileage Rate Refer To?
The IRS standard mileage rate is a recommended reimbursement rate for companies for their employees who use their personal vehicles to conduct business on behalf of their employer. For example, if a business chooses to use 2023’s mileage rate, they will reimburse their employee 65.5 ($0.655) cents per mile driven in their personal vehicle for business use.
This figure changes yearly and is based on the fixed and variable costs of owning and operating a motor vehicle. Things like gas, oil changes, vehicle depreciation, and other factors go into the IRS determining the number.
It is important to note that this is an optional rate for companies to offer to their employees. There isn’t a federal requirement or mandate to do so, although some states have their own requirements. Generally, companies that offer mileage reimbursement plans tend to hire and retain higher-quality candidates.
How Will the 2024 IRS Standard Mileage Rate Change?
Since 2011, the IRS mileage rate changes have fluctuated, going up for a few years, going down for a few years after that, then going back up for a bit, and so on.
The standard business mileage rate went down steadily between 2019 and 2021, from $0.58 to $0.575 in 2020, to $0.56 in 2021. The rate then increased twice in 2022, first to $0.58.5 in the first half of the year, then to $0.62.5 after July 1. 2023’s rate increased further, currently sitting at $0.65.5 cents per mile.
This is, once again, due to their determination of the fixed and variable costs of owning and operating a motor vehicle. In order to determine how the business mileage rate will change in 2024, we need to examine trends and the changes to the costs of owning and operating a vehicle through 2024.
How Have Vehicle Costs Changed Throughout 2023?
According to the United States Energy Information Administration, national average gas prices have been lower on average in 2023 compared to 2022. The rare mid-year increase that occurred in July of 2022 almost certainly took 2022’s historically high gas prices into account.
While gas prices in 2023 have remained relatively high compared to past years, the fact that they are lower compared to 2022 could contribute to a smaller increase or even a small decrease in the mileage rate.
However, a significant factor that could affect the 2024 mileage rate is the increased cost of car insurance. According to the US Bureau of Labor Statistics, the cost of car insurance in 2023 is up 19% compared to 2022, the largest annual increase since 1976.
In addition, car insurance costs have also increased in the same time frame. In addition, a report from AAA found that the average cost of owning and operating a vehicle increased 14% in 2023 compared to 2021.
Other Factors That Might Impact the 2024 Mileage Rate
Generally, the costs of owning a vehicle continue to go up, which may make one think that the standard business mileage rate will increase, but there are other factors to consider.
For instance, inflation might be an important factor. The rate of inflation decreased between 2018 and 2021, which may be a big contributor to why the standard business mileage rate has decreased in the same time frame.
With the massive spikes in inflation that we have seen since 2022, the IRS could very well use that in their determination, too.
What We Predict the 2024 Mileage Rate Will Be
With all of that said, given the general increases in the costs of owning and operating a motor vehicle, we at TripLog would assume that businesses should be prepared for a likely increase in the standard business mileage rate.
We predict the number won’t go up more than a couple of cents, given the historically large jumps of 4 cents and 3 cents from early to mid-2022 and 2023, respectively, as well as the precedent set by previous years’ smaller increases.
Related: Mileage Guide For Employers
We predict that companies should expect the rate to increase to around 67 or 68 cents per mile from the current rate of 65.5 cents per mile, but don’t be surprised if the number stays the same or even drops a cent or two.
Even for smaller companies with only a dozen or so mobile employees driving a few thousand miles each year, this can mean an increase in total reimbursement costs by several hundred or even a few thousand dollars. Larger companies with 100+ drivers may pay significantly more.
Be Prepared for an Increase in the Standard Mileage Rate Come 2024
Using a modern company mileage tracking solution like TripLog is the best way for companies to ensure they’re providing accurate reimbursement to their mobile team members and employees.
To learn more about what TripLog’s mileage tracker app can do for you and your company, please schedule a complimentary demo, or visit our pricing page to get started on your mileage reimbursement journey in minutes. You can also try our mileage reimbursement savings calculator!