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IRS Announces Standard Mileage Rate for 2021

by D. Gregory Valenza | |

The IRS Standard Mileage rate for 2021 will be $0.56 per mile.  That’s down $0.015 from 2020. The IRS announcement is here.

Employers typically use this rate to reimburse employees for the business use of their personal vehicles.  In some states, it’s not required to make such reimbursement.  What’s required under the federal Fair Labor Standards Act is to ensure that employees do not incur expenses that take their compensation below minimum wage.

In California, though, employers must reimburse employees for reasonably necessary business expenses, per Labor Code section 2802. And that may include business use of personal vehicles.  Is the IRS reimbursement rate required?  No.  The employer must reimburse the actual cost of the business use.  But the California Supreme Court has held that the IRS rate is presumptively fine, unless the employee can prove that he or she incurs a greater cost.  That would require proof that the actual cost of operating the vehicle for business use exceeds $0.56 per mile (for such things as gasoline, wear and tear, the value of oil, the deterioration of the brake linings, tires, etc.).

 

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