The optional standard mileage rates for business use of a vehicle have been decreased for 2020, after having increased significantly in 2019, the IRS announced on Tuesday, December 31st. For business use of a car, van, pickup truck, or panel truck, the rate for 2020 will be 57.5 cents per mile, down from 58 cents per mile last year. Taxpayers can use the optional standard mileage rates to calculate deductible cost of operating a vehicle.
Because the law known as the Tax Cuts and Jobs Act (TCJA) suspended the miscellaneous itemized deduction under Sec. 67 for unreimbursed employee business expenses from 2018 to 2025, the standard mileage rate cannot be used to claim a deduction for those expenses during that period. However, self-employed taxpayers can deduct automobile expenses is they qualify as ordinary and necessary business expenses. An exception to the disallowance of a deduction for unreimbursed employee business expenses applies to members of a reserve component of the U.S. armed forces, state or local government officials paid on a fee basis, and certain performing artists. They are permitted to deduct mileage expenses and may continue to use the 57.5 cents-per-mile standard mileage rate.
The standard mileage rate also can be used as the maximum amount an employer can reimburse an employee for operating an automobile for business purposes without substantiating the actual expense incurred.
If you have any questions about the change in the standard mileage rate and how it pertains to your business, please call our office.