IRS Sets Standard Mileage Rate for 2021 by Kevin McNally, JD
Posted on March 24, 2021
by
Kevin McNally
The IRS issued the 2021 optional standard mileage rates qualifying taxpayers may use to calculate deductible costs of operating an automobile for business or for charitable, medical or moving purposes. Taxpayers also have the option to calculate the actual costs of using their vehicle rather than using the standard mileage rates.
Effective Jan. 1, 2021, the standard mileage rates for the use of a car, van, pickup truck of panel truck is:
- 56 cents per mile driven for business use (down 1.5 cents last year’s rate),
- 16 cents per mile driven for medical purposed (down 1 cent last year’s rate), and
- 14 cents per mile driven in service of charitable organizations (the same rate as last year).
Taxpayers should note that the Tax Cuts and Jobs Act eliminated their ability to claim miscellaneous itemized deductions for unreimbursed employee travel expenses in tax years 2018 through 2025. Exceptions to this rule exist for self-employed taxpayers, eligible educators, performing artists, certain government officials, and members of the armed forces with unreimbursed business travel expenses who may deduct mileage for purposes of determining taxable income but not as a miscellaneous itemized deduction.
The law also prohibits taxpayers from claiming deductions for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. Instead, these mileage rates may be used by employers to reimburse 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 reimbursed amounts from their taxable income.
Taxpayers may use the standard mileage rate for no more than five vehicles, none of which may have been depreciated under the Modified Accelerated Cost Recovery System (MACRS) or claimed as a Section 179 deduction.
About the Author: Kevin McNally, JD, is a senior manager of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he works with high-net-worth families, private equity firms and real estate development businesses on a broad range of tax matters, including complex deal structuring. He can be reached at the CPA firm’s Miami office at 305-379-7000 or at info@bpbcpa.com.
← Previous
