New Optional Standard Mileage Rates for 2020

The IRS recently released the optional standard mileage rates for 2020, as follows:

• 57.5 cents for every mile of business travel driven (down 0.5 cents from 2019)
• 17 cents per mile for medical care or moving purposes (down three cents from 2019)
• 14 cents per mile for gratuitous services to a charitable organization

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.

Due to new provisions created under the Tax Cuts and Jobs Act, business mileage rates cannot be used to claim an unreimbursed employee travel expense as a miscellaneous itemized deduction, nor can moving mileage rates be used to deduct moving expenses incurred for taxable years beginning after December 31, 2017. Members of the Armed Forces moving under permanent change of station orders are exempt, however, from the restriction on moving expenses.

These limitations do not affect business travel expenses that are properly deducted on a taxpayer's Schedule C for self-employed individuals, independent contractors and freelancers.

It’s also important to note that business mileage still cannot be used where Modified Accelerated Cost Recovery System depreciation is taken or after a Section 179 deduction has been claimed for a vehicle, and that the business standard mileage rate still cannot be applied to more than four vehicles at the same time. Taxpayers may still elect to use actual allowable expense amounts instead of the standard rates provided the taxpayer has maintained adequate records or retained otherwise sufficient evidence.

As with all complex tax decisions, the election to use the optional mileage rate can have far-reaching implications. Schneider Downs is always here to help, so please don’t hesitate to contact your local SD tax professional if you have any questions or concerns.