Effective January 1, the mileage rate for reimbursing federal employees has been increased by the General Services Administration (GSA). The new rates that will impact most employees are:
- If use of privately owned automobile (POV) is authorized or if no Government owned automobile is available: $0.575
- If Government-owned automobile is available: $0.23
The previous reimbursement rate for driving a POV that was effective on January 1, 2014 was $0.56.
The change in reimbursement rates will surprise some people because of the rapid drop in the price of gasoline. There has been a 31 percent decline in the average price of regular gas since June 2014. The price of gas has probably not stopped dropping yet as many analysts expect oil costs to continue dropping as there is an excess of oil now due to a drop in demand and an increase in oil supply that has occurred in large part due to the success of fracking in the United States.
The reimbursement rate increase is counter intuitive because of falling gas prices. The reason for the increase is because of how GSA determines the reimbursement rate. Another federal agency, the Internal Revenue Service (IRS), determines the mileage reimbursement rate for taxpayers who can deduct the mileage rate on their taxes. GSA uses the IRS reimbursement rate for its decision.
The IRS bases its annual rate based on an annual study. As a result of having an annual study, the average cost of gas in a yearly study is higher than price of gas at the pump is today. The IRS considers not only the cost of gas but the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance and, of course, the cost of gas and oil.
The reimbursement rate does not always go up. For example, in 2010, the mileage rate was reduced by GSA from 55 cents per mile to 50 cents. Also, in previous years, GSA was not required to use the IRS rate to determine the rate for reimbursing federal employees. As noted in the Washington Post, the latest appropriations bill changed this situation and GSA is now required to use the IRS rate.
So, while many federal employees are not happy about an increase in their health insurance premiums or an annual across-the-board raise of 1% in 2015, federal employees who travel have seen the system work in their favor on this issue because they will be getting more money as reimbursement for their travel using their own car while paying less at the gas pump.