The standard mileage reimbursement rate for employees who use their own cars for business purposes will be 48.5 cents per mile in 2007, up from 44.5 cents per mile in 2006, the Internal Revenue Service said.

Each year, the IRS issues standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Employers who use the IRS standard mileage rate to reimburse employees may deduct the reimbursement as a business expense. If employers use the approved rate (or a lower rate), the IRS considers that requirements to substantiate and adequately account for the expense are satisfied without extensive documentation of actual expenses.

Beginning January 1, 2007, the standard mileage rates for the use of a car (including vans, pickups, or panel trucks) will be:

• 48.5 cents per mile for business miles driven;
• 20 cents per mile driven for medical or moving purposes (up from 18 cents in 2006); and
• 14 cents per mile driven in service to a charitable organization.

The primary reasons for the higher rates were higher prices for vehicles and fuel during the year ending in October.

The standard mileage rates for business, medical and moving purposes are based on an annual study of the fixed and variable costs of operating an automobile. Runzheimer International, an independent contractor, conducted the study for the IRS.

The mileage rate for charitable miles is set by statute.

For more information, see Revenue Procedure 2006-49.