New Mileage Rates Announced for 2019
Each year the Internal Revenue Service (IRS) adjusts the standard mileage rate based on the fluctuating costs of operating a vehicle – including the cost of fuel. If you use a car in your business, you could be entitled to some substantial tax deductions!
The IRS recently announced the 2019 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
58 cents per mile driven for business use, up 3.5 cents from the rate for 2018
20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018
14 cents per mile driven in service of charitable organizations
It is important to note that under the Tax Cuts and Jobs Act (TCJA), taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Notice-2019-02.
Do I Qualify for a Mileage Deduction?
If you use your car in your business and you use it only for that purpose, you may deduct its entire cost of operation (subject to limits discussed later). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.
You can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction.
Standard Mileage Rate - The standard mileage rate applies to any actual business miles driven. To use the standard mileage rate, you must own or lease the car and:
You must not operate five or more cars at the same time, as in a fleet operation
You must not have claimed a depreciation deduction for the car using any method other than straight-line
You must not have claimed a Section 179 deduction on the car
You must not have claimed the special depreciation allowance on the car
You must not have claimed actual expenses after 1997 for a car you lease
You can't be a rural mail carrier who received a "qualified reimbursement"
To use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use the standard mileage rate or actual expenses. For a car you lease, you must use the standard mileage rate method for the entire lease period (including renewals) if you choose the standard mileage rate.
Actual Expenses - To use the actual expense method, you must determine what it actually costs to operate the car for the portion of the overall use of the car that's business use. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles.
Documentation – In order to claim any auto expenses, you have to be able to show the total miles the vehicle was driven that year, and how many of those miles were driven for business purposes. There are a number of cell phone apps which make this easy to do. If you choose to use actual expenses, you also have to be able to prove what you sent for things like lease payments, loan interest, vehicle purchases, gasoline, repairs, insurance, etc.
Note: Other car expenses for parking fees and tolls attributable to business use are separately deductible, whether you use the standard mileage rate or actual expenses.
If you have questions about standard mileage rates or need help calculating your mileage deduction, please CONTACT US right away. We’re here to help!