30 Dec Business Travel and IRS Mileage Rates for 2021
“Business travel … will take a long time to return to previous levels after the COVID-19 pandemic.”
So said McKinsey last August. In December, Bill Gates said he expects 50 percent of business travel “will go away.” Heads of major airlines do not expect a return to former levels for several years. By last April, business travel plunged. Business air travel in 2020 was down by 80 percent.
McKinsey forecasts a slow recovery for business travel, and in phases. The first phase is likely to see regional travel involving personal vehicles or rental cars for face-to-face sales or client meetings and essential business operations, primarily in manufacturing, pharmaceuticals and construction.
In the second phase, domestic air travel improves. Travel purposes begin to include internal meetings, training and other small group gatherings. International travel will not rebound until the third phase, tempered by government regulations and restrictions. This will coincide with a return to industry trade shows, conferences, exhibitions and large-scale events.
These phases are not tied to dates–or to 2021–in McKinsey’s discussion. McKinsey says that travel managers and directors tell them they closely monitor local indicators of public health and government regulations, plus employees’ willingness to travel and vendors’ health and safety policies. Several managers and directors expect to add a one-to-three-month buffer to government guidance. See For Corporate Travel, a Long Recovery Ahead.
Meanwhile, planning sources show modest activity planned for 2021. Business Travel News reports an i-Meet Planner Confidence survey, taken the week of December 20, shows more than two-thirds of planners have a future face-to-face meeting or event contracted. But a majority expect to resume in-person gatherings in the latter half of 2021, not before. Just six percent expect to resume in the first quarter and 20 percent in the second quarter. Twelve percent of the 259 planners do not know when their organizations will resume face-to-face meetings.
But Gate’s point is that the pandemic has changed how people conduct business. Travel will rebound somewhat but will not return to what it was before the pandemic.
This is the context in which the IRS has announced the 2021 mileage rates. In McKinsey’s view that regional travel, involving personal vehicle use and car rentals, is the area expected to increase first.
56 cents per mile
The new mileage rate is down a penny-and-a-half from 2020 to 56 cents per mile driven in 2021.
The rate for driving in the service of charitable organizations is unchanged at 14 cents per mile (it is a statute-set rate and has not changed in several years). The mileage rate for miles driven for medical purposes, and moving purposes for qualified active-duty military personnel, has gone down a cent to 16 cents per mile.
According to the IRS, “The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.”
These new rates apply to travel from January 1, 2021. The arrival of vaccines certainly helps a business travel restart. But it’s wait-and-see how fast and how far a business travel rebound may be. It will likely be a long wait.