How Much Can You Reimburse Employees Tax-Free in the New Year?

The IRS has announced the new standard mileage rates your business will use for 2021. And this time, the IRS is decreasing the amount you can reimburse employees tax-free on the road.

As of Jan. 1, 2021, the new mileage rates are:

  • 56 cents per mile for business miles driven (down from 57.5 cents per mile)
  • 16 cents per mile for medical or moving purposes (down from 17 cents per mile; only for active duty military, due to the Tax Cuts and Jobs Act)
  • 14 cents per mile driven in service of charitable organizations (unchanged).

It’s safe to say that most companies have been through a lot of changes in the past year, due mainly to the coronavirus pandemic. Employees rapidly switched to remote work. Processes were revamped and digitized. Budgets needed to be reconsidered and shifted.

This lower mileage rate now marks another change – one you’ll want employees to comply with right away.

As you know, a new mileage rate can often spur errors on expense reports, especially during the beginning of the year. And since air travel has largely been grounded, your company’s miles driven may have gone up, potentially leading to even more mileage expenses than normal.

Don’t forget to update your internal resources. You’ll need to modify the rates and switch the year from 2020 to 2021 on your company intranet, expense report template, T&E policy, etc.

Interested in learning about other changes in 2021 that could impact your business? Call 407.679.7600 or click HERE for a free consultation.


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