Tax Planning Basics: What to Know About 2020's Standard Mileage Rates

Julian Block provides updates on standard mileage rates for this year, as well as insights into how the COVID-19 pandemic could affect the government's decisions.

Apr 9th 2020
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My client roster includes individuals who use their cars for these purposes: conduct their businesses; do volunteer work on behalf of charities; or to obtain medical care. The IRS, I remind them, annually revises its standard mileage rates that taxpayers use to calculate their deductible costs of operating vehicles for such purposes. 

To assuage concerned clients, I tell them a kinder and gentler IRS doesn't narrowly define "cars." The term includes vans, pickups, panel trucks or motorcycles.

2020's rate for business driving: 57.5 cents per mile. 

Rates for the previous four years: 58 cents for 2019; 54.5 cents for 2018; 53.5 cents for 2017; and 54 cents for 2016. 

What about trips to rental properties? They're deductible on Schedule E at the same rate as business driving.

2020's rate for medical driving: 17 cents per mile. 

Who qualifies? Individuals who itemize on Form 1040's Schedule A and whose payments for uninsured medical costs exceed the nondeductible threshold of 7.5 percent of adjusted gross income. 

Rates for the previous four years: 20 cents for 2019, 18 cents for 2018, 17 cents for 2017 and 19 cents for 2016.

2020's rate for itemizers who claim charitable contributions: 14 cents per mile. Congress permanently set it at this amount (Internal Revenue Code Section 170). The Gang of 535 refuses to budge.

2020's rate for moving expenses for Armed Forces members: 17 cents per mile. While the Tax Cuts and Jobs Act (TCJA) that Congress approved and President Trump signed just two days before Santa descended chimneys in 2017 includes a provision that suspends the deduction for moving expenses for the years 2018 through 2025, the legislation carves out an exception. The suspension doesn't apply to members of the Armed Forces on active duty who move pursuant to a military order and incident to a change of station.

Parking fees and tolls. I counsel clients to avail themselves of another, frequently overlooked break. Besides claiming the mileage allowances, they're also allowed to take separate deductions for parking fees, as well as bridge, tunnel and turnpike tolls they pay whilethey're driving for business, medical or charitable reasons.

Some restrictions on business driving: I caution clients that fees that they pay to park their cars at their place of work are nondeducible
commuting expenditures. Also, an intransigent IRS is alert to another ploy. It says that they can't convert the cost of travel between home and work from nondeductible commuting to deductible medical travel merely because illnesses or disabilities rule out their use of public transportation.

IRS audits. What usually happens when IRS examiners question write-offs for car expenses? They won't challenge standard-rate deductions, provided taxpayers are able to substantiate their miles driven. 

The moral for taxpayers: Keep glove-compartment diaries or other records in which they list the details of when, how far and why they went,along with their outlays for parking and tolls.

Please note: Coronavirus crisis caused a collapse in gas prices at the pump. The IRS announced 2020's mileage rates before the Corona outbreak and the slump in prices.

Expect the agency to respond to the chaotic convergence of COVID-19 and taxes. Will it be to limit use of the rates to the pre-crisis part of 2020 and 
use lower rates for the crisis part of 2020? There's precedent for the IRS to do so. It adjusted rates (Jan-Jun and Jul-Dec) for 2008 and 2011. Stay tuned for AccountingWeb announcements.  

Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 350 and counting). 

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