The standard mileage rate, also known as the mileage per diem or deductible mileage, is the default cost per mile set by the Internal Revenue Service (IRS) for taxpayers who deduct the expense of using their personal vehicles for business, charitable, or medical purposes.
The rate is adjusted annually by the IRS and differs depending on whether the vehicle is used for business, charitable, or medical purposes. For the 2020 tax year, the standard mileage rate for business use is set at 57.5 cents per mile. For tax year 2021, the business use rate is 56 cents per mile.
The taxpayer has the option of calculating the amount of the deduction using the standard mileage rate or based on actual expenses.
The deduction for personal vehicle use as a moving expense has been eliminated except for active-duty military personnel.
The rates are revised by the IRS each year.
The standard mileage rates vary by allowable use. The rates for allowable deductions are currently as follows:
For business use: 57.5 cents per mile in the tax year 2020, and 56 cents per mile for the tax year 2021
For medical purposes: 17 cents per mile in the tax year 2020, and 16 cents per mile for the tax year 2021
For charitable purposes, 14 cents per mile for both tax years 2020 and 2021. The deduction for use of a vehicle as a moving expense is no longer allowed except for active military members. The standard mileage rates are the same as for medical purposes.
The IRS bases the mileage rates on cost data and analysis compiled every year by Runzheimer International, an independent research firm that contracts for the IRS. Runzheimer International uses data from across the country and measures auto insurance premiums, gas prices, maintenance costs, depreciation, and other costs that go into operating a vehicle.
The standard mileage deduction for operating a vehicle for business purposes is based on both the fixed and variable costs of driving a car, while the standard mileage deduction for operating a vehicle for medical or moving purposes is based only on the variable costs of driving a car.
The standard mileage deduction for using a car for charitable purposes is based on minimums established by federal law and is meant to reimburse taxpayers for the unreimbursed, out-of-pocket costs of volunteer work.
The 2021 standard mileage rate for miles driven for business purposes.
While a taxpayer can choose to deduct actual expenses or take the standard mileage deduction, the taxpayer who takes the standard deduction has a much simpler and less error-prone job to do. The odometer checks are necessary in either case to enter the total number of miles used for business. However, no receipts need to be saved if the standard mileage amount is used.
The taxpayer must own or lease the vehicle in order to claim the standard mileage rate on it. A taxpayer can claim the standard mileage rate on up to four vehicles.
Commuting to a regular place of business is not deductible, but driving to client meetings or events may be. A taxpayer can deduct mileage when providing services, like volunteering at an event for a 501(c)3 charitable organization.
A taxpayer owns a 2015 Ford Escape and drives it for business purposes. The taxpayer can claim the standard mileage rate for every mile driven for business purposes during the year.
To claim this rate, the taxpayer logs all the miles driven for business purposes in a notebook in the car’s glove box. (Naturally, there are apps for this, too.)
At the end of the year, the taxpayer multiplies the number of miles driven for business purposes by the 2020 standard mileage rate of 57.5 cents per mile. A taxpayer who drove 4,500 miles for business purposes in 2020 could then deduct 4,500 multiplied by 0.58, or a total of $2,587 as an allowable business expense.