In all of the years stated above, an additional 4¢ per kilometre is allowed for drivers in the Northwest Territories and Nunavut. United States of America IRS rates for 2011-2021Ģ011 (Q1 & Q2): 51¢ Canada CRA first 5000 rates for 2015-2021:Ģ015: 55¢ CRA after 5000 rates for the same period: US and Canada Standard Mileage Reimbursement Rates: a History Cardata has designed a comparable FAVR program for Canadian companies, so that they can realize the same benefits. Cardata implements FAVR programs in the US to rectify those inequities, while also saving companies money. A truly equitable system involves accounting for the assorted fixed and variable costs of all drivers. Yet if their colleague drove 40,000 miles in rural Wisconsin in 2021, they would be reimbursed $22,400-enough to buy themselves a brand-new car.įor companies with drivers in diverse locales, the CPM model is unfair. That number is not enough to cover even one of many common car repairs. Low mileage drivers, by contrast, are discouraged from driving at all, since their reimbursements do not cover their fixed and variable automobile expenses.įor example, if a driver drove 5000 miles in LA for work in 2021, they would be reimbursed only $2,800. This encourages employees to “drive for dollars”-to intentionally cover large distances on the highway for extra reimbursements. High-mileage drivers tend to be overcompensated for their travel, whereas low mileage drivers tend to be under-compensated. Since no two vehicles cost exactly the same to own and operate, reimbursing equal sums to every driver leads to inequity. It is suboptimal for companies who require employees to drive daily for business. For this reason, employers often transition to fixed and variable rate (“FAVR”) programs.ĬPM is chiefly useful for reimbursing employees that drive occasionally. ![]() ![]() Fuel prices change far more regularly than do the suggested rates, and different vehicles in different cities cost various amounts to insure. In practice, cents per mile programs do not perfectly reflect these fluctuating costs. Insurance, depreciation, fuel, maintenance, tires-these expenses are all meant to be captured by the suggested CPM rates. Disadvantages of CPMĬents per mile is not the only option for a business vehicle program.ĬPM is meant to reimburse drivers for a variety of costs associated with purchasing and operating a vehicle. This is done because organizations do not want reimbursements to become covert income payments. Any amount paid beyond that figure is assessed for both payroll and income tax. The rates suggested by the IRS and the CRA are the maximum values that can be repaid to employees before the reimbursement is assessed for tax. Below you can see a history of each organization’s recommended rates. In Canada, the CRA rate for 2021 is 59 cents per kilometre (for the first 5000 kilometres-53¢ per mile after that). In 2021, the IRS standard rate for reimbursements is 56 cents per mile. Then they reimburse drivers according to the standard rate set by the relevant tax authority. They must accurately log the miles driven by every employee, including the purpose of the trip and destinations. To institute a CPM program, employers need to empower their employees to use their own vehicle for work. For those reasons, employers opt for CPM. The former is expensive and administratively burdensome the latter is subject to income and payroll taxation. Some enterprises operate on fleets of company-owned or leased vehicles others pay flat rate car allowances to employees to supply and drive their own car. Is cents per mile a good reimbursement program? The IRS and CRA both set optional standard mileage rates in cents for employee vehicle reimbursements. ![]() ![]() Using the Cents per Mile (“CPM”) rate, companies reimburse their employees who use their personal vehicle to drive for business purposes. What is a Cents per Mile mileage reimbursement?
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