If you use your vehicle for business, medical, or charitable purposes, you may qualify for a tax deduction. The deduction is calculated based on a mileage rate times the number of miles you drive. You must keep accurate records of your miles to qualify for the standard mileage rate deduction.
Mileage Rate for 2019
The IRS issues three standard mileage rates each year. The rate you use to calculate your deduction depends upon the purpose for using your car or truck. The standard mileage rates for 2019 are:
- 58 cents per mile for business miles
- 20 cents per mile for medical miles
- 14 cents per mile for charitable miles
Mileage Rate for 2020
The three standard mileage rates for 2020 decreased or stayed the same compared to the 2019 mileage rates. The standard mileage rates for 2020 are:
- 57.5 cents per mile for business miles
- 17 cents per mile for medical miles
- 14 cents per mile for charitable miles
Required Mileage Documentation
To claim car and truck expenses, you are required to keep detailed logs of all deductible trips. For each trip, you must record the date, purpose, starting and ending point, and total round-trip miles.
QuickBooks Online makes the documentation simple. The QuickBooks mobile app will use your phone’s GPS to track and log the mileage for you. Best of all, because the mileage is integrated into the QuickBooks program, it will transfer your data to your QuickBooks Online account automatically. If you don’t already use QuickBooks Online for your bookkeeping, you can sign up now to start a free 30-day trial.
How the Mileage Rate Works
Your vehicle expense deduction is calculated by taking the number of miles driven times the appropriate standard mileage rate. However, only miles that qualify as business, medical, or charitable qualify for the standard mileage rate deduction. Below is a discussion of the qualifications for each type of mileage, along with a description of how to deduct them.
What Are Business Miles?
A vehicle is driven for business miles when the use of the vehicle is ordinary and necessary for conducting business in your industry. For instance, driving from the office to visit a client or worksite would count as business miles. However, commuting from your home to your work location is specifically excluded. If you have two work locations, traveling between locations is not commuting and is deductible mileage.
What Are Charitable Miles?
Charitable miles are driven when you use your car to provide services to a charitable organization. These miles include commuting from your home to the charity if you are going there to do volunteer work, or even to drop off a donation.
What Are Medical Miles?
A vehicle is driven for medical purposes when it is used to transport you or one of your dependents to and from the doctor, dentist, optometrist, hospital, or anywhere you receive care that qualifies for a medical expense deduction.
How to Deduct the Standard Mileage Rate
Business owners deduct the standard mileage rate for business miles in the same manner as you deduct any other business expense. For tax years starting in 2018, employees are no longer allowed a deduction for business miles driven.
You can deduct the standard mileage rate for charitable miles on your Form 1040, Schedule A, line 11, along with your cash charitable contributions. You can also claim your standard mileage rate deduction for medical miles as a medical expense on Form 1040, Schedule A, line 1.
I recommend using good tax software, like TurboTax, to help prepare your tax return. TurboTax will walk you through a series of questions regarding your vehicle use for each purpose and then make sure you claim the deduction in the proper place. You can start your return today with TurboTax Online and not pay until you are ready to file your return.
How Mileage Reimbursement Works
Only unreimbursed mileage expenses can be deducted. There are two common scenarios where you might be reimbursed for your vehicle expense based on miles driven:
- Employer mileage reimbursement: Employers may choose to reimburse employees for business miles they drive using their own vehicle. The standard mileage rate is also the maximum mileage reimbursement rate. Employers can choose to reimburse at a lesser rate or not to reimburse at all. If they reimburse miles at a higher rate, the excess reimbursement must be included in the taxable wages of the employee.
- Medical mileage reimbursement: The deduction for medical mileage is treated like any other medical expense so that it can be paid for out of your flexible spending account (FSA) or health savings account (HSA). Apply for a reimbursement to yourself for up to the medical standard mileage rate times the medical miles you drive.
Standard Mileage Rate vs Actual Expenses
The standard mileage rate deduction is instead of deducting actual car and truck expenses, such as gas, repairs, and depreciation. The vast majority of taxpayers choose to use the standard mileage rate for its simplicity since you aren’t required to keep any receipts. The only records you need to claim the standard mileage rate is your trip log discussed above.
Bottom Line
One benefit of being a small business owner is the ability to reduce your tax bill with legitimate tax deductions like vehicle expenses. The standard mileage rate can result in big tax savings with only minimal bookkeeping requirements.
Tracy Smith
If you have used the standard mileage deduction in the past but want to move to actual expenses and depreciation for the future one of the things it asked is if you took the one time bonus depreciation. I answered no. Now the software is asking how much precious depreciation I have taken in the previous years. Since I used the standard mileage calculation I don’t know what to put since it is part of the overall standard calculation. What do you suggest?
Tim Yoder
Hi Tracy,
That is a great question! A portion of the standard mileage rate claimed in prior years is considered to be depreciation, so when you convert from the standard to actual, you need to reduce your depreciable basis in the automobile. This sounds like what the software is doing. The depreciation portion of the standard mileage rate for 2020 is 27 cents and for 2019 it is 26 cents. If you deducted miles prior to that, you should be able to find the rate by googling “depreciation portion of standard mileage rate 20xx”.
You’re accumulated depreciation in each year is the number of miles deducted times the depreciation cents per mile. Add up all the years to get your total accumulated depreciation, which is what the software is asking for. If your accumulated depreciation is more than the cost of the car, that is fine, but the program will probably only allow you to enter accumulated depreciation up to the cost.
I hope this helps!
Tim