Hi Larry - I read your blog, followed directions, and now we are logging miles. However the girls feel 30 cents per mile is too little. We are in California and right now the cheapest gas is $3.60 per gallon. Minimally, what is fair to charge them? Thank you. Doris
Doris, I've done some checking and the girls are correct in that you could pay them 50.5 cents per mile and still be within the government guidelines. Triple A says that the cost of driving a car is close to 75 cents per mile.
The costs that are in the mileage rates are not only for gas but are also for repairs, insurance, new tires, oil changes, interest and depreciation of the car. For example, if I drive an old clunker that doesn't need many repairs and it gets 30 miles per gallon, and you drive a new Hummer that cost $85,000 and it gets 8 miles per gallon, we both get, under the government guidelines, 50.5 cents per mile.
Having said all of that, as you know we are looking at ways of cutting costs, and increasing mileage is going to go against the grain. Let’s see how we can explain that to the girls.
If they are getting 20 miles per gallon and the cost of gas is $3.60 per gallon, then the cost of gas per mile is 18 cents per mile ($3.60 divided by 20). Since you are paying them 30 cents per mile you are actually paying their gas plus an additional 12 cents per mile. Sounds fair to me. It would be possible to increase their mileage and decrease their wage which would save them taxes but I don’t think I would go there right now. Just tell them you are being fair and see what they say.
Let me know if you have any other questions.
It is a pleasure serving you.
Larry Kopsa CPA
