As we know that every year, the tax deductions for mileage are done by the IRS. It may be possible that sometimes the rate will increase and sometimes there will be a downfall in the rates. As of January 1, 2020, here we are providing you the list of the mileage rates for the various POV ie. Privately Owned Vehicles such as cars, vans, pickups and panel trucks:
● $0.575 per mile driven for business use
● $0.17 per mile for trips that are for medical purposes
● $0.17 per mile for moving (however, be aware of new rules)
● $0.14 per mile driven in the service of charitable organizations
The rate per mile is down by one half cent compared to last year (57.5 cents in 2020 compared to 58 cents in 2019). To find the details of the IRS standard mileage rates for 2021, one can easily make use of the IRS website!
The IRS Mileage Rate For Business
For cars, vans, pickups and panel trucks, the mileage rate of $0.575 per mile for business is used. Every year, the business mileage rate is provided by the IRS, so the employees may be required to use the other rate that is determined by their employer.
In the case, when an employee uses his/her personal vehicles for the various purposes that are related to their work or business, then it becomes his/her employer’s choice to offer mileage reimbursement for employees. Along with this, it’s the employer’s choice to select what rate will be or what formula he/ she may use to reimburse employee’s mileage. If an employer chooses to reimburse the employee for the costs that are related to the use of their personal vehicles for work related purposes, he/ she may select tracking mileage expenses when reimbursing their employee.
If the IRS will do the reimbursement to the employees by their employers more than the determined mileage rate, the employee is subject to income tax on the amount above the IRS mileage rate.
For the tax deduction for mileage by the self- employed individuals or business owners, the rate is set forth by the IRS.
Medical, Charity and Moving Purposes IRS Mileage Rates:-
Normally, in 2020, the rates for various activities other than business purposes are different. For calculating the deductible costs of operating an automobile, charitable, medical and moving purposes, one can make the use of the summary of the optional standard mileage rates which is as listed below:
a) The mileage rate for business purposes is $0.17 per mile.
b) For moving purposes (allowable only for Armed Forces on active duty), it is allowed to make the use of $0.17 per mile.
c) The mileage rate for the services of charitable organizations is $0.14 per mile.
Is The IRS Mileage Rate The Only Method For Reimbursement?
One can easily make the use of various methods for calculating the mileage reimbursement. IRS mileage rate is one of them. This is available for employers, self- employed as well as business owners.
Not only this, but it is possible for an employer to make the use of various other methods that help in the effective calculation of mileage expenses that are incurred by employees for reimbursement. There is an option available for the self- employed or business owners for calculating mileage based on the mileage rate. Along with this, it depends upon the calculation of general expenses that are related to operating a vehicle used for different work related purposes. In the case when computation is done on the basis of mileage rate, there will be no deduction of tax from the above provided rates!
Note that reimbursing moving expenses is no longer considered as tax deductible. But it has some exceptions like Armed Forces on active duty who are required to move under orders. This change is due to the passing of the 2017 Tax Cuts and Jobs Act (TCJA).
Properly Tracking Mileage
There may be some chances that mileage tracking of self- employed or employees, contractors, freelancers and business owners can also take more time than usual. For dealing with such situations, we have a better option for you. Instead of manually calculating the mileage, make the use of various apps for mileage tracking such as TripLog. It is considered as one of the best mileage tracker apps for business. It reduces time and efforts for computation of mileage expenses. By using this, do the expense tracking and mileage calculation in an affordable and easy manner!