IRS Mileage Rates for 2020

The Service recently updated the standard mileage rates for automobiles and small trucks used in a business or profession in 2020. Those rates are:

  • 57.5 Cents / Mile for all miles of business use (business standard mileage rate)

  • 14 Cents / Mile for use of an automobile to render gratuitous services to a charitable organization; and

  • 17 Cents / Mile for use of an automobile:

  • for medical care described in IRC § 213; or

  • as part of a move for which the expenses are deductible under IRC § 217(g).

With a few exceptions (e.g. military personnel who who move due to a permanent change of station) the Tax Cuts and Jobs Act (TCJA) repealed the itemized deduction for Employee Business Expenses (EBE). Thus, for Federal purposes, the auto mileage rates (and the pro-rata cost apportionment method) apply only to mileage incurred by sole proprietors, partners-members of partnerships and limited liability entities, corporations (S or C), and other business entities.

Several states, California among them, did not repeal the EBE itemized deduction. Check your state's rules and procedures. Consultant tax professionals if you live in a state that does not conform to TCJA.

Observation: Work-around(s) for employees who incur mileage expense;

  1. Negotiate a reimbursement plan with your employer: or

  2. If your profession supports it - create a business entity to "loan out" your services

Employers can deduct business expenses - employees cannot. A reimbursement plan transfers the expense from employee to employer. If the plan covers more than mileage expense, you and your employer should consult a tax representative - keyword: Accountable Plan.

Loan out companies are common in some industries and occupations - but won't fly in others. [*1] Consult your employer, tax representative, and a knowledgeable attorney before you proceed on this path.

[*1] Loan-outs are common in the entertainment industry, where multiple employers each year is the rule rather than the exception. Executive loan-outs (for executives who work primarily for a single company) are "discouraged" in the Internal Revenue Code (c.f. IRC §§ 269A and 482).

Photo Credit: Wonderslist

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