IRS Mileage Reimbursement

The IRS Mileage Reimbursement Changes Annually

Weary man driving on a business trip with laptop and file folders on set next to him and button up shirt hanging in back seat
•••

Stockbyte/Getty Images

The Internal Revenue Service (IRS) mileage reimbursement rate is an optional amount recommended by the IRS to calculate certain taxpayer deductions. It's used to calculate the deductible costs of operating an automobile for business purposes, traveling to medical appointments or testing, and for purposes related to charitable causes.

The IRS mileage reimbursement rate is adjusted each year and is dependent upon the IRS-determined cost of operating a motor vehicle. The mileage deduction rate for 2020 went into effect on Jan. 1, 2020. The next one went into effect on Jan. 1, 2021.

The mileage reimbursement rate for business is based on an annual study of the fixed and variable costs of operating an automobile, according to the IRS. The rate for medical and moving purposes is based on the variable costs as determined by the same study, which is conducted annually by independent contractor Runzheimer International.

Runzheimer International Calculates the Rates

Runzheimer is the leading business vehicle technology and solutions provider. It's worked with the IRS since 1980 to calculate the business mileage deduction rate using a consistent method and statistical analysis of vehicle cost components. Using detailed data from across the nation, the rate measures auto insurance premiums, maintenance costs, vehicle depreciation, and fuel and other costs that reflect the movement of prices in the marketplace.

Costs of operating an automobile include depreciation, insurance, repairs, tires, maintenance, gas, and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

2020 Mileage Reimbursement Rates

The 2020 optional standard mileage rates for the use of a car, van, pickup, or panel truck are:

  • 57.5 cents per mile driven for business use, down .5 cent from the rate for 2019
  • 17 cents per mile driven for medical purposes, down 3 cents from the rate for 2019
  • 14 cents per mile driven in service of charitable organizations. The charitable rate is set by statute and remains unchanged.

2021 Mileage Reimbursement Rates

The 2021 optional standard mileage rates for the use of a car, van, pickup, or panel truck are:

  • 56 cents per mile driven for business use, down 1.5 cents from the rate for 2020
  • 16 cents per mile drive for medical purposes, down 1 cent from the rate for 2020
  • 14 cents per mile driven in service of charitable organizations. The charitable rate is set by statute and remains unchanged.

People Who Use Their Cars for Business

The IRS mileage reimbursement rate guides tax deductions for the use of a car or truck by self-employed individuals, or by certain employees who use their own vehicles for work-required travel.

Employers use the IRS mileage reimbursement rate to reimburse employees for business-related use of their personal vehicles. Employees are generally required to produce receipts and mileage reports in this case.

Taxpayers can't use the IRS mileage reimbursement rate on their income tax returns if they've used a depreciation method for the same vehicle to account in the past.

Taxpayers have the option to document the actual costs of driving their vehicle, or they can use the IRS mileage reimbursement rate for tax purposes. 

A consultant and trainer who drives to client locations or other venues to perform services must track both the location where the service was performed and the number of miles driven round trip. The consultant/trainer is also expected to track personal miles traveled using the same vehicle. A tax professional will need a business mileage total and a personal mileage total to work with when tax season arrives. They'll use this information to legally adjust taxes paid using the business miles as an allowed business deduction. 

Article Sources

  1. IRS. "IRS Issues Standard Mileage Rates for 2020." Accessed Jan. 3, 2021.

  2. IRS. "IRS Issues Standard Mileage Rates for 2021." Accessed Jan. 3, 2021.