IRS Updates Standard Mileage Rates, Guidance for 2020 by Lewis Taub, CPA
Posted on January 29, 2020
by
Lewis Taub
The IRS updated the standard mileage rates that taxpayers may use to substantiate the costs they incur, and may be reimbursed by their employers, when they use their personal cars, vans or trucks for business purposes.
These are the rates taxpayers will use beginning on Jan. 1, 2020, for the tax returns they will file in 2021.
- 5 cents per mile driven for business use (down one-half of a cent from 2019),
- 17 cents per mile driven for medical purposes (down three cents from 2019), and
- 14 cents per mile driven in service of charitable organizations.
Employers have the option to use the standard mileage rate as a benchmark for reimbursing workers for the ordinary and necessary costs incurred when using their personal vehicles for business purposes. Alternatively, employers may require workers to track the actual business use of their vehicles and submit documentation to substantiate the costs for which they request reimbursement. In general, companies may deduct employee reimbursements as business expenses, while employees may exclude those amounts received from their taxable income.
However, under the Tax Cuts and Jobs Act (TCJA), for tax years 2019 through 2025, employees may not claim as miscellaneous itemized deductions the unreimbursed, out-of-pocket costs they incur for business travel and/or using business use of their personal vehicles. Exceptions to this rule exist. Specifically, during the suspension period, self-employed taxpayers, eligible educators, performing artists, certain government officials, and members of the armed forces with unreimbursed business travel expenses may deduct mileage that is deductible not as miscellaneous itemized deductions but in determining taxable income, may use the business standard mileage rate for that purpose.
The tax code also makes it clear that taxpayers cannot use the standard mileage rate for more than five vehicles nor for any vehicle in which they previously used a depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or claimed a Section 179 deduction.
About the Author: Lewis Taub, CPA, is a director in the New York office of Berkowitz Pollack Brant Advisors + CPAs, where he works with entrepreneurial business, multinational and multi-state corporations on tax planning and compliance strategies, including those related to mergers and acquisitions, basis issues and debt restructuring. He can be reached at the CPA firm’s New York office (646) 213-7600 or info@bpbcpa.com.
Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.
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