Tuesday, December 4, 2012

Standard Mileage Rate Increases $0.01 in 2013

Parsley Sage Rosemary & Ginsburg llp
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Mike Marget
December 4, 2012
Standard Mileage Rate Increases $0.01 in 2013

The IRS standard mileage rate for use of a vehicle in a business will increase by a penny per mile for miles driven in 2013.  (IRS Notice 2012-72)  For business use of an automobile, the 2013 rate will be 56.5 cents per mile.[i]  Driving for medical or moving purposes similarly increases to 24 cents per mile.  Both rates are one cent higher than for 2012.

These rates are based on annual studies of the costs of operating an automobile.  The business mileage rate factors in the increased fixed and variable costs of operating an automobile, while the medical/moving rate is based solely on increased variable costs.

Since most law firms reimburse partners and employees for business use of personal automobiles based on the IRS standard rate and, where permitted, pass those amounts through as costs to clients, it is important for firm managers to plan for this upcoming change. 

Beginning January 1, 2013, it will be important to distinguish between whether the miles driven occurred in calendar year 2012 or 2013.  The one cent increase applies only to travel occurring after December 31, 2012, regardless of whether the reimbursement or client billing occurs in 2013.

I’m fairly certain those outfits who audit legal bills for insurance companies will modify their software to look for this penny-per-mile difference by travel date.  My advice is to get it right when you process the reimbursements. 

[i] Notwithstanding IRS standard mileage rates, taxpayers always have the option of calculating the actual cost of using their vehicle for tax purposes.  However, extremely accurate records are required to substantiate such deductions.  Seek advice from your professional tax preparer before traveling this route.


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