Higher Standard Mileage Rates for 2019

Using your vehicle for business, charitable, medical or moving purposes could still qualify you for a tax deduction. As usual, deductibility depends on your particular situation. So, if you qualify, how much is that deduction worth? Again, it depends.

One option is to take the standard mileage tax deduction, which is determined each year by the Internal Revenue Service, based on IRS data about the cost of operating and maintaining a vehicle. A “vehicle” includes passenger cars, vans, pickups or panel trucks.

The IRS recently issued the new standard mileage rates used to calculate the deductible costs of operating a vehicle for business, charitable, medical or moving purposes. Beginning on January 1, 2019, the standard mileage rates for the use of a vehicle 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, and
  • 14 cents per mile driven in service of charitable organizations. The charitable rate is set by statute and remains unchanged.

Sounds great, right? Those mileage rates can really add up. Just remember that there are limitations and exclusions, some of which got stricter under the Tax Cuts and Jobs Act. Under these limitations, taxpayers cannot:

  • Claim a miscellaneous itemized deduction for unreimbursed employee travel expenses.
  • Claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station.
  • Use the business standard mileage rate for a vehicle after using any depreciation method or after claiming a Section 179 deduction for that vehicle.
  • Use the business standard mileage rate for more than four vehicles simultaneously.

Also remember that you always have the option of calculating the actual costs of using your vehicle instead of using the standard mileage rates. You have to track your mileage for each vehicle no matter which method you use. Compare the standard mileage calculation to the actual cost. You can select whichever option results in a higher deduction.

Taking vehicle deductions involves a lot of tracking, but the effort can be worth it. Those deductions can really add up, especially with the new standard mileage rates issued by the IRS for 2019 to operate a vehicle for business, charitable, medical or moving purposes.

Using your Vehicle for Business

If you are a business owner, you probably use your personal vehicle for business. The IRS allows you to deduct the business use of your vehicle on your tax return (medical and charity use, too – more about that below). Of course, the IRS has rules to follow in order to take that tax deduction. The beginning of the new tax year is a good time to review those rules and how to follow them.

 

Step One to deducting the business use of your vehicle is to keep a log of your business miles. Actually, you need to track all of your miles. Your tax return will need to include the total miles driven during the year, the total commuting miles and total business miles.

 

Step Two is to determine which of the two allowable vehicle deduction methods gives you the bigger tax benefit. You may have to track the information for both methods to figure out which is best for your situation.

 

The first method is the Standard Mileage Rate Method, which is adjusted annually based on the overall operating expense studies done by the IRS. The studies take into consideration the costs of maintenance, repairs, depreciation, registration, gasoline prices, etc. The standard mileage rate for business use of a vehicle will increase slightly in 2018 to 54.5 cents per mile (from 53.5 cents in 2017).

 

The second method is the Actual Expense Method. This method requires that the taxpayer not only maintain a log of total miles, business miles and commuting miles, but also report the details of the actual cost of operating the vehicle, including repairs, maintenance, gasoline, oil, registration, insurance, inspections, car washes, etc.

 

The total actual vehicle operating expenses are deducted at the percentage of business miles of the total miles driven during the year. For example, if you drove a total of 15,000 miles in 2017 with 3,000 for business (20%), and spent $4,500 to operate your vehicle, you could deduct $900, or 20%, of the vehicle operating costs on your taxes

 

Expenses for parking fees and tolls attributable to business use are deducted separately, whether you use the Standard Mileage Rate Method or Actual Expense Method.

 

Driving for medical or moving purposes may be deducted at 18 cents per mile for 2018, which is one cent higher than for 2017.The rate for service to a charity is unchanged, at 14 cents per mile.