Starting January 1, 2021, the standard mileage rates for the use of a car, van, pickup, or panel truck are as follows:
- 56 cents per mile driven for business use, down 1.5 cents from the rate for 2020
- 16 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, down 1 cent from the rate for 2020, and
- 14 cents per mile driven in service of charitable organizations. The charitable rate is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.
Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.
Before tax reform, these optional standard mileage rates were used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes. However, it is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station.
Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses.
Leased vehicles. Typically, if the standard mileage rate is chosen, then leased vehicles must use the standard mileage rate method for the entire lease period (including renewals). Due to the COVID-19 pandemic, however, the IRS is allowing employers to switch from the vehicle lease valuation method to the cents-per-mile method (56 cents for 2021 and 57.5 cents for 2020) when determining the value of an employee’s personal use of a vehicle during the pandemic, and is effective as of March 13, 2020.
If you have any questions about standard mileage rates or which driving activities you should keep track of as the new tax year begins, do not hesitate to contact the office.
Disclaimer: This information is of general nature and should not be assumed to provide tax, legal or accounting advice. This website has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. I will be happy to discuss your situation further, but until that time, it is assumed no client/CPA relationship exists. Information within this blog has not been confirmed for accuracy and in many instances has been reposted from other sources.