IRS Updates Mileage Reimbursement for 2017

By Raul Rivera

Each year the IRS takes time to reassess the standard mileage reimbursement rates used to calculate the deductible costs for an individual who operates his/her vehicle for business, charitable, medical, or moving purposes. Because of this, it is important for churches to be familiar with these updates for 2017; especially since many pastors and church volunteers use their personal vehicles for church purposes.

Beginning on January 1, 2017, the standard mileage reimbursement rates for the use of one’s personal vehicle will be as follows:

• 53.5 cents per mile for business miles driven (for employees); down from 54 cents for 2016.
• 14 cents per mile driven in service of charitable organizations (for volunteers); no change in this rate.

While this information is important for your church to know, it is more important that you know how to properly handle such reimbursements. 

The remainder of this article will focus on how you and your church can properly reimburse your staff and volunteers for the miles they drive for church purposes. However, before we get into that, let’s take a look at how the way may churches handle mileage reimbursement is incorrect.

How many churches mishandle mileage reimbursements

Many of the pastors and church leaders that we speak with daily assume that when it comes to mileage reimbursement the church can simply fill up the gas tank for the individual in need of reimbursement. However, mileage reimbursement doesn’t quite work that way.

In the instance that a church simply fills up the gas tank of an employee or volunteer, then the amount paid to fill up his/her gas tank technically becomes taxable income. 

I realize this may seem absurd, but it is true. The instance of filling up an employee’s or volunteer’s gas tank becomes taxable income to that person because the act of filling up his/her gas tank is technically being done in consideration for a service he/she provided (i.e. driving somewhere for the church).

Since this is a common mistake amongst churches, let’s take a look at how to properly handle mileage reimbursement for both employees and volunteers of your church.

(Recommended reading: “The 2016 Ultimate Year-End Checklist for Churches”)

How to calculate mileage reimbursement

There are two general methods that can be used in order to reimburse an employee and/or volunteer for the mileage he/she drives for church purposes: the actual expense method and the standard mileage rate method.

Churches often misunderstand how to properly handle mileage reimbursements.

Below we will take a look at both of these methods.

1. Actual expense method:

Of the two methods that can be used for mileage reimbursement, the actual expense method is the most burdensome of the two for the individual seeking reimbursement. As is stated in the name of this method, an individual can deduct the actual cost of using their vehicle for business or charitable purposes, plus depreciation.

As you can guess, this method requires more record keeping than the standard mileage rate method, however, it can result in a large deduction for the driver. If you choose to reimburse your church employees or volunteers via the actual expense method, then they must keep track of all costs incurred for their vehicle each time they used their vehicle for church purposes.

Some items that the employee or volunteer must keep track of includes, but is not limited to, the following:

• gas and oil
• repairs and maintenance
• car repair tools
• tires
• registration fees
• depreciation of the vehicle and improvements
• insurance
• towing charges
• car washes
• and more

Here is an example of how the actual expense method works: 

Benny is a church chaplain who drives his car 20,000 miles during the year. He also spent $7,000 on car expenses during the year. Of the total miles driven, 6,000 miles was attributed to his chaplaincy work: visiting the homes of parishioners, pray for the sick, serve the homeless and minister to those who are imprisoned. Chaplain Benny can claim 30% (6,000 ÷ 20,000) of the cost of operating his car as a business expense for his work as a chaplain. Of the $7,000 spent on car expenses, $2,100 may be deducted for mileage reimbursement.

(Recommended reading: “Fill Your Car With Gas, Break The Law, Part 1”)

2. Standard mileage rate method

The more common method for tracking mileage reimbursement is the standard mileage rate method. The substantiation requirements for this method are much less rigorous, and many churches that have gone through our StartRIGHT® Program have found that this method is an easier process for both the church and individual needing mileage reimbursement.  

The standard mileage rate method requires that the driver keep track of how many miles he/she drives for church purposes, not the actual expenses of the vehicle as noted above. In addition to keeping track of the mileage, the individual should also keep track of the following:

• the date that the miles were driven,
• the destination he to which he drove,
• and the purpose for which the miles were driven.

Now, although the substantiation requirements are the same for both a church employee and a volunteer, keep in mind that the rate at which they are reimbursed differs.

(Recommended reading: “Fill Your Car With Gas, Break The Law, Part 2”) 

Are you ready to get ahead in 2017?

Part of our vision and mission here at StartCHURCH is to supply church pastors and church leaders just like you with up-to-date information that will help you to better protect what God has given you to lead. You no longer have to wonder if what you are doing is being done the right way. 

We would love to partner with you to give you the confidence you need to move forward in a strong, compliant manner.

If you have any further questions concerning mileage reimbursement, or if we can be of service to you and your church or ministry, please feel free to call us at 877-494-4655. We are glad to serve you!

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