Mileage payout falls short of gas cost
By John Eckberg
Cincinnati Enquirer
Gasoline prices have been drifting in the range of $1.95 to $2.30 a gallon in recent weeks (higher in Hawai'i), but the impact has been constant: a drag on corporate revenue and a sponge soaking up wages when an employee uses his or her vehicle on company business.
Even if your company offers reimbursement for the business use of your vehicle, you may be able to claim a deduction for the costs on your income tax return. Take these steps: • Calculate the annual cost of your vehicle — including depreciation and interest (or lease expense), insurance, gasoline, tires, oil changes and repairs. • Create a list of the miles driven for work and for personal needs. The percentage of business miles logged compared to total miles represents the percentage of costs that may be allowed as a deduction. • If the actual cost exceeds your annual reimbursement, you may be able to take a deduction from your taxable income on your federal income tax return. A mileage deduction can only occur as an unreimbursed employee business expense if an individual's total miscellaneous deductions (tax preparation fees, investment fees, union dues and other qualified costs) exceed 2 percent of adjusted gross income, said Tom Cooney, partner in the Cincinnati accounting firm Cooney, Faulkner & Stevens LLC.
"I'm an antiques dealer, and high gas prices are definitely affecting my business," said Jeff Craig, owner of Antiquities, Rarities & Oddities in Cincinnati. "In the last couple of months, I've started to reduce the number of sales I go to."
TAX BREAK? MAYBE
Sue Snodgrass is a hospice nurse. She can't cut back on her driving because patients count on her to get to them. Even though her reimbursement recently rose from 32.5 cents a mile to 37.5 cents, Snodgrass is on the losing end of the fuel war.
"The increase sure isn't keeping up with gas prices," she said.
But pressed by their workers, many companies are raising their mileage allowances.
Some large employers have raised their mileage reimbursement to the federal standard. Among those at the 40.5-cent level are Procter & Gamble, GE Transportation and Federated Department Stores.
This year, the American Automobile Association estimates that it will cost 51.4 cents a mile to drive a six-cylinder sedan — or $10,280 annually — and 57.2 cents a mile for an eight-cylinder sedan — or $11,444 annually.
But with the federal reimbursement rate set at 40.5 cents a mile — up 3 cents from 2004 — employees who are paid the federal maximum while driving for their employer still may be losing as much as 16.7 cents for every mile driven for company duties, AAA said.
Drivers of SUVs such as a Chevrolet TrailBlazer pay even more, according to AAA — about 63.8 cents a mile.
Employees who drive fewer miles will never make out as well as high-mileage drivers, said Mike Bassi, principal accounts consultant for Runzheimer International, a Rochester, Wis.-based management consulting firm that has developed vehicle-cost standards since its founding in 1933.
"There's no way that a single rate will be right for everybody," he said, because insurance rates will vary, for instance, and because some cars get more miles to the gallon than others. "Cents-per-mile always underpays low-mileage drivers and always overpays high-mileage drivers."
Another factor limiting reimbursements is the tax code. Any stipend over 40.5 cents a mile must be considered taxable income, Bassi said, and that would reduce how much workers get.
While employees say mileage reimbursement rates lag driving costs, many companies can't afford to keep pace with sharply rising gas prices, said economist Dimitri Papadimitriou, president of the Levy Economics Institute in Annandale-on-Hudson, N.Y. He predicted that if firms were forced to raise mileage reimbursements, they would make corresponding cuts to budgets.
"Given the economic conditions, which are mixed, employers will have to decrease employment or suppress real wages," Papadimitriou said. "Companies are really affected by increases in oil prices."
Rick Wilson assists with home-sales closings and the recording of deeds and mortgages in Ohio county courthouses for Gerner & Kearns. He drives 1,900 miles to 2,500 miles every two weeks. He estimates he's lost about $400 this year, compared to when gas cost about $1.80 a gallon.
"My company pays me 40.5 cents per mile, and I pay anywhere from $34 to $37 per fill-up at $2.249 per gallon," he says.
