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New standard mileage rates for 2021

Posted on January 8, 2021

The IRS issued 2021 optional standard mileage rates are used to calculate the tax-deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

Beginning on January 1, 2021, the IRS standard mileage rates for automotive use (which includes vans, pickups or panel trucks) are as follows:

  • 56 cents per mile driven for business use, down 1.5 cents from the rate for 2020,
  • 16 cents per mile driven for medical or moving purposes for qualified active duty members of the Armed Forces, down 1 cent from the rate for 2020, and
  • 14 cents per mile driven in service of charitable organizations. This rate is set by statute and remains unchanged from 2020.

This established rate for business use is based on an annual study of the fixed and variable costs of operating a typical automobile, according to the IRS.

Exceptions:

  • It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses.
  • Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. (Need more details? Visit Moving Expenses for Members of the Armed Forces.)

What if you believe your vehicle operational costs are higher? The IRS realizes this is a possibility. So taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates – with this caveat:

  • Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use.
  • After that first year, they can choose either the standard mileage rate or actual expenses.
  • Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Got questions? IRS Notice 2021-02 contains the optional 2021 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. The notice also provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2021 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

Of course, if you need anything at all clarified, just give Teipen CPA Group a call and we’ll put the pedal to the metal for you with information you can trust, in no time flat.