January 20, 2020
The IRS issued the 2020 optional
standard mileage rates
on December 31. These rates can be used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on January 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 expense from the rates for 2019. The charitable rate is set by statute and remains unchanged.
Under the Tax Cuts and Jobs Act (TCJA), taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Most taxpayers also cannot claim a deduction for moving expenses. Members of the Armed Forces on active duty moving under orders to a permanent change of station are the exception.
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.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer 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.
Other limitations apply
For purposes of computing the allowance under a fixed and variable rate (FAVR) plan, the standard automobile cost may not exceed $50,400 for automobiles (including trucks and vans).
For purposes of the fleet-average valuation rule and the vehicle cents-per-mile valuation, the maximum fair market value (FMV) of automobiles (including trucks and vans) first made available to employees in calendar year 2020 is $50,400.
For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 24 cents per mile for 2016, 25 cents per mile for 2017, 25 cents per mile for 2018, 26 cents per mile for 2019, and 27 cents per mile for 2020.
Martin C. McCarthy, CPA, CCIFP
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).