Mileage reimbursement could return to highest level ever

The rate at which agencies reimburse federal employees who drive their own cars for work could go up by 4 cents per mile in January, if the government continues its pattern of following the Internal Revenue Service's lead.

The IRS announced Wednesday that beginning Jan. 1, 2007, the standard rate used to calculate the deductible costs of operating an automobile for business purposes will be increased to 48.5 cents per mile, matching the highest rate ever, set in the fall of 2005. The current rate, set at the beginning of 2006, is 44.5 cents per mile.

The General Services Administration is permitted under federal law to establish a reimbursement rate for federal employees who use personal vehicles for official business, but it cannot exceed the one established by the IRS primarily for tax deduction purposes. In the past, the GSA rate consistently has followed the IRS one.

Higher vehicle and fuel prices for the year ending last month prompted the increase for 2007, the IRS stated. The rate is based on a study of the fixed and variable costs of operating an automobile, including gas prices, oil, tires and scheduled maintenance. The study was conducted by Runzheimer International, an independent contractor based in Rochester, Wis.

GSA briefly set the federal employee mileage reimbursement rate at 48.5 cents per mile when record-high gas prices in the aftermath of the 2005 Gulf Coast hurricanes spurred the IRS to make the unusual move of raising the rate 8 cents a mile in the middle of the year. GSA followed suit less than a week later.

In May, the National Treasury Employees Union called for a rate increase when the average price of gas nationwide neared $3 per gallon. NTEU has supported legislation introduced last year during the fuel price run-up that would raise the IRS rate to 60 cents per mile and require GSA to do the same.

According to federal travel regulations, employees may use personal vehicles for official travel if they obtain permission from their agency. The reimbursement rates apply only to the authorized means of travel.

The mileage reimbursement does not pertain to employee relocations. Transfers or relocations are designated as a transportation expense rather than as an allowance for the cost and operation of the vehicle, according to GSA.

The following chart shows the mileage rates adopted by GSA over the last decade.

** There was no rate change in 1997

Source: General Services Administration