New Year, New Mileage Rates

IRS Issues Standard Mileage Rates
For 2020

You will be reimbursed less for your business mileage expenses in 2020.

The Internal Revenue Service has issued the 2020 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

The Rates

Beginning on Jan. 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 expenses from the rates for 2019. The charitable rate is set by statute and remains unchanged.

It is important to note that under the Tax Cuts and Jobs Act, you cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. You also cannot claim a deduction for moving expenses unless you are a member of the Armed Forces on active duty moving under orders to a permanent change of station.

How The Rate Is Determined

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.

Other Options

You always have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.

However, you may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than five vehicles used simultaneously. See Section 4.05 of Rev. Proc. 2019-46 for additional limitations.

Employer-Provided Vehicles

Notice 2020-05 posted on IRS.gov contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan. In addition, for employer-provided vehicles, the Notice provides the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2020 for which employers may use the fleet-average valuation rule or the vehicle cents-per-mile valuation rule.

If you need assistance in determining the best method for handling your business mileage, contact your local tax professional.