2020 Standard Mileage Rates: New Rules. Less Reimbursement.
tl;dr: Checked the IRS standard mileage rate recently? New IRS rules for mileage reimbursement in 2020 decreases mileage rate by one-half of one cent.
Do you drive for business? 35% of business travelers do, preferring their car over taking a flight. The IRS recently announced the 2020 “standard mileage rates”. Whenever you drive for business, medical reasons, or in support of a charitable organization, you may be able to get a mileage deduction and save money on your income taxes.
Here’s a breakdown of what is covered for each:
The Internal Revenue Service today issued the 2020 optional standard mileage rates (PDF) used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on January 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 57.5 cents per mile driven for business use, down one half of a cent from the rate for 2019,
- 17 cents per mile driven for medical or moving purposes, down three cents from the rate for 2019, and
- 14 cents per mile driven in service of charitable organizations.
The business mileage rate decreased one half of a cent for business travel driven and three cents for medical and certain moving expense from the rates for 2019. The charitable rate is set by statute and remains unchanged.
The IRS stressed that under the Tax Cuts and Jobs Act, taxpayers can’t claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. They also can’t claim a deduction for moving expenses, except members of the Armed Forces who are on active duty and moving under orders to a permanent change of station. For more details, check out Rev. Proc. 2019-46.
With business mileage, your commute to your regular place of business is not deductible mileage when you’re an employee. For self-employed individuals, any driving you do directly related to your business, like meeting with a client or going to a networking event, may be deductible business mileage.
Good news! You can claim medical miles for those that you drive to receive medical care, which includes you, your spouse, or your children. The amount of this deduction is added to your medical deduction, which means it will only be included if your total medical expenses exceed 7.5% of your adjusted gross income and you can itemize your tax deductions.
You can also claim charitable mileage for the driving you do in service of a recognized 501 (c)(3) charitable organization. Another good reason to volunteer your time!
The standard mileage rate for business use is based on a yearly study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes depends on the variable costs.
Taxpayers also have the option of calculating the actual costs of using their vehicle as opposed to using the standard mileage rates.
A taxpayer can’t use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (or MACRS for short) or after claiming a Section 179 deduction for that vehicle. Furthermore, the business standard mileage rate can’t be used for more than five vehicles simultaneously. These and other limitations are explained in section 4.05 of Rev. Proc. 2019-46.
Notice 2020-05 discusses the standard mileage rates, the amount a taxpayer needs to use in figuring reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer can use in computing the allowance under a fixed and variable rate plan. For employer-provided vehicles, the notice also describes the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2020 for which employers can use the fleet-average valuation rule or the vehicle cents-per-mile valuation rule.