Each December, the IRS sets the mileage reimbursement rate for the following year. If businesses choose to reimburse their employees for work-related driving, this is the rate at which such reimbursement should be done. The IRS 2010 standard mileage rate is $.50 per mile.
An independent contractor calculates this amount for the IRS each year, based on the “fixed and variable costs of operating an automobile” in the previous year. These costs include fuel prices, as well as maintenance. The 2010 rate is $.05 lower than the 2009 rate of $.55 per mile. The IRS attributes this reduction to “generally lower transportation costs” as compared to the previous year (2008).
The mileage reimbursement rate has risen dramatically in recent years, mainly due to the sharp increase in gas prices over the past few years. For example, the rate in 2003 was $.36 per mile; in 2006 it was $.445 per mile; and in the second half of 2008, it was $.585 per mile.
See this article on the IRS web site for more information: http://www.irs.gov/newsroom/article/0,,id=216048,00.html
This article was written by Melissa L. Demorest, Associate at Demorest Law Firm.