IRS Updates Guidance on for Deductible Mileage

Jeff Kim
Focused on You. Dedicated to Your Success.
December 16, 2019

The IRS issued Revenue Procedure 2019-46 last month, which updates the rules for using the optional standard mileage rates in computing the deductible costs of operating an automobile for business, charitable, medical or moving expenses. The guidance reflects changes under the Tax Cuts and Jobs Act (TCJA).

As of January 1, 2019, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) is 58 cents per mile driven for business use, 20 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations. The standard mileage rates for 2020 have not yet been released. 

This revenue procedure also provides rules for substantiating the amount of an employee's ordinary and necessary expenses of local travel or transportation away from home that a payor (an employer, its agent, or a third party) reimburses using a mileage allowance. Taxpayers are not required to use the substantiation methods described in this revenue procedure. A taxpayer may substantiate actual allowable expense amounts if the taxpayer maintains adequate records or other sufficient evidence. a taxpayer may not deduct any portion of the cost of operating an automobile attributable to personal use.

During the suspension period, a taxpayer may not claim a miscellaneous itemized deduction for parking fees and tolls attributable to the use of the automobile for business purposes. A taxpayer may deduct, as separate items, parking fees and tolls attributable to the use of the automobile for business purposes to the extent the items are deductible in computing adjusted gross income. 

A taxpayer may also deduct, as separate items, parking fees and tolls attributable to the use of the automobile for deductible charitable, medical, or moving expense purposes to the extent otherwise allowable. State and local personal property taxes are not deductible as charitable, medical, or moving expenses. State and local personal property taxes may be deducted as separate items to the extent allowable. 

TCJA suspended the miscellaneous itemized deduction for most employees with unreimbursed business expenses. Self-employed individuals and certain employees (armed-forces reservists, qualifying state or local government officials, educators and performing artists) may continue to deduct unreimbursed business expenses.

The moving expenses deduction which was suspended under TCJA does not apply to an active-duty member of the U.S. Armed Forces who moves because of a military order or a permanent change of station.

A taxpayer may not use the business standard mileage rate to compute the deductible business expenses of:
  • Five or more automobiles a taxpayer owns or leases and uses simultaneously (such as in fleet operations). 
  • An automobile a taxpayer leases unless the taxpayer uses either the business standard mileage rate or Fixed and Variable Rate (FAVR) allowance for the entire lease period.      
  • An automobile for which the taxpayer has (a) claimed depreciation using a method other than straight-line for its estimated useful life, (b) claimed a Section 179 deduction, (c) claimed the additional first-year depreciation allowance or (d) used the Accelerated Cost Recovery System (ACRS) under or the Modified Accelerated Cost Recovery System (MACRS). 
  • A miscellaneous itemized deduction subject to the 2-percent floor for unreimbursed travel expenses paid or incurred during the suspension period. 
 
In addition, a taxpayer who is an employee of the United States Postal Service may not use the business standard mileage rate or this revenue procedure to compute the amount of the taxpayer’s deductible automobile expenses incurred in performing services involving the collection and delivery of mail on a rural route if the taxpayer receives qualified reimbursements. 
 
A taxpayer who pays or incurs unreimbursed employee travel expenses that are deductible by such taxpayer in computing adjusted gross income may use the business standard mileage rate to compute the adjustment to gross income, notwithstanding the suspension of miscellaneous itemized deductions during the suspension period.

Feel free to call any member of our team to discuss your situation at 610-828-1900 (PA) or 732-341-3893 (NJ). You can contact Jeff Kim, manager at Jeff.Kim@MCC-CPAs.com or me at Marty.McCarthy@MCC-CPAs.com . We are always happy to help. We are here to help. 

Martin C. McCarthy, CPA, CCIFP
Managing Partner 
McCarthy & Company, PC 

Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).