Every year, the Internal Revenue Service (IRS) in the United States and Canada Revenue Agency (CRA) in Canada issue mileage rates for business travel and moving expenses. In 2017, the IRS decreased both rates for Americans, while the rate in Canada stayed the same:
Our history with the IRS
Runzheimer has worked with the IRS since the 1980s, helping them develop the IRS standard mileage rate. With an ever changing vehicle and fuel market, it is important to update the data every year to assure accuracy. They rely on our research, data, and recommendations to develop the annual safe harbor rate.
What contributes to the IRS mileage rate?
There are a number of factors that play a role in the data we provide to the IRS, and the process is similar to the way we develop reimbursement amounts for our vehicle clients. Runzheimer provides data and information on both the fixed and variable costs of owning and operating a vehicle across the U.S. Fixed costs include license and registration, taxes, depreciation and insurance. Variable costs include fuel, maintenance, and tires. It’s important to note that the data used is a national average across the United States which includes for regional differences in cost-of-living.
The IRS then takes this vehicle information and determines what the “moving” mileage rate will be for individuals that relocate for job-related purposes. The 2017 rate of 17 cents per mile is intended to cover only the operating costs of driving a vehicle, not the ownership costs.
Why the decrease?
The 2017 rate has decreased from 2016 primarily due to the change in fuel costs. On average, fuel costs are significantly lower for the year, despite increasing in recent months. Plus, more than just the price of fuel goes into setting this rate. The increasing costs of both vehicle insurance and maintenance costs counteracted the large fuel price decrease—only allowing the rate to reduce by 0.5 cents. The beauty of the IRS mileage rate is that the combination of several factors goes in to the calculation in order to produce the most accurate and representative rate possible.
It is important to be sure that you update any and all rates you are using for the U.S. and Canada each year to reflect the current rates for the calendar year. This would include rates used to calculate Lump-Sum Allowances and/or reimbursements of driving expenses for relocation-related trips (such as Home Finding or Final Move expenses). Keep in mind, that mileage costs for Final Move expenses, at the rate of 17 cents per mile for 2017, are considered a non-taxable reimbursement.