Posted by Karen Munoz, EA

What is the Standard Mileage Rate?

What is the Standard Mileage Rate?

The standard mileage rate, also known as daily mileage or deductible mileage, is a rate set by the Internal Revenue Service (IRS) per mile maintained by a taxpayer for business purposes or any other deductible reason, such as for charitable or medical purposes. The taxpayer can deduct the standard mileage rate instead of deducting the actual costs, as the cost of gasoline and vehicle wear and tear are included in the rate.


Breakdown of the Standard Mileage Rate.

The standard mileage rate is set by the Internal Revenue Service (IRS), which a taxpayer can deduct per mile allocated for business, charitable activities, changes, or medical purposes. The standard mileage rate changes regularly to keep up with inflation. The mileage rate for 2019 is 58 cents per mile for business purposes, up from 54.5 cents in 2018; 14 cents per mile for charity, unchanged from 2018; and 20 cents per mile for medical and mobile purposes, up from 18 cents in 2018.

The IRS bases these rates on data and cost analyzes compiled annually by Runzheimer International, an independent research firm with contracts with the IRS. Runzheimer International uses data from across the country and measures auto insurance premiums, gasoline prices, maintenance costs, depreciation, and other costs associated with operating a vehicle.

The standard mileage deduction for driving a vehicle for business purposes is based on the fixed and variable costs of driving a car. In contrast, the standard mileage deduction for driving a vehicle for medical purposes or relocation is based exclusively on variable costs of driving a car. The standard mileage rate for driving a car for charitable purposes is based on federal law's minimum set. It is intended to reimburse taxpayers for the direct unreimbursed costs of charitable work.

While the taxpayer can choose to deduct the actual expenses or take the standard mileage deduction, the taxpayer who makes the standard deduction not only has simpler calculations but can save money as well. The taxpayer must own or lease the vehicle to claim the standard mileage rate, and a taxpayer can claim the standard mileage rate for up to four vehicles. Moving to regular employment is not tax-deductible but may result in meetings or events with clients. A taxpayer may deduct miles by providing services, such as volunteering at an event, for 501 (c) 3 charitable organizations.

 

Example of the Standard Mileage Rate

A taxpayer owns a Ford Escape and drives it for business purposes. The taxpayer can claim the standard mileage rate for each mile he spends in the tax business the following year. To claim this tax, the taxpayer records all of the kilometers driven by the car for business purposes on a laptop in the car's glove box or an app on his phone. At the end of the year, the taxpayer multiplies the number of miles traveled for business purposes by the 2019 standard mileage rate of 58 cents per mile. If the taxpayer had driven 6,500 miles for business purposes in 2019, he would have deducted 6,500x0.58, or $ 3,770 total per mileage.


Standard Mileage Rate of 2020

For 2020, the standard mileage rates for the use of a car, truck, van, or truck will be:

  • 57.5 cents per mile for commercial use, down from 58 cents in 2019.

  • 17 cents per mile for medical or walking purposes, compared to 20 cents.

  • 14 cents per mile for a charity run, which hasn't changed.

The 2020-05 Notice also states that for cars an employee uses for their business, the portion of the standard mileage rate considered depreciation would be 27 cents per mile in 2020, up from 26 cents per mile in 2019.

Although standard mileage charges for business, medical, and moving purposes are based on annual changes in the costs of operating a car, the charity rate is set by law.

Motus, which provides the Internal Revenue Service (IRS) with data on commercial vehicle use, the significant trends influencing the 2020 rate decline were lower national average fuel prices and better fuel economy. In new vehicles, although these savings were partly offset by factors such as slightly higher insurance prices due to expensive repairs, more expensive vehicle technology, and higher labor costs.

According to the IRS, taxpayers still can calculate the actual costs of using the vehicle instead of using standard mileage rates. They will need to document their mileage properly, the agency said.


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Karen Munoz, EA
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