The Internal Revenue Service (IRS) has issued the 2018 optional standard mileage rates and beginning on January 1, 2018, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
- 54.5 cents per mile for business miles driven (up from 53.5 cents in 2017)
- 18 cents per mile driven for medical or moving purposes (up from 17 cents in 2017)
- 14 cents per mile driven in service of charitable organizations (currently fixed by Congress)
If you’re wondering about the difference in the rates for business and medical or moving purposes, there’s a reason: the standard mileage rate for business is calculated using an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil while the rate for medical and moving purposes is based on the variable costs, such as gas and oil.
The optional standard mileage rates are used to calculate the amount of a deductible business, moving, medical or charitable expense (miles driven times the applicable rate). To use the rates, simply multiply the standard mileage rates by the number of miles traveled. If you use your car for business and personal use, you’ll want to keep appropriate records and back out the cost of personal travel.
It’s possible to use more than one rate on your tax return. Let’s say, for example, that you drive 20,000 miles in 2017. Of those miles, 10,000 are for personal use, 2,000 are for charity and 8,000 are for business use. You would calculate your deduction as follows:
10,000 personal miles x 0 = 0
2,000 charitable miles x .14 = $280
8,000 business miles x .545 = $4,360
Your total deductible mileage related expenses would be $4,640 plus additional related charges such as parking fees and tolls.
Under current law, taxpayers have the option of deducting their actual expenses rather than using the standard mileage rates – though admittedly, that’s a lot more work.
Whether these 2018 rates will impact most taxpayers in 2018 isn’t yet clear. The current tax reform proposals would eliminate the mileage deduction for moving expenses and job-related business mileage deductions for employees filing a Schedule A. In addition, both proposals would disallow – on the employer’s side – favorable tax treatment for employer reimbursement of employee moving expenses. However, under Senate version of the bill, the tax treatment of these deductions would sunset, which means that the treatment of expenses would go back to the way the law is now (in 2017) beginning in 2026.
(Updated: The final version of the GOP conference bill does not include an adjustment to the charitable mileage rate.)
Both proposals would retain the charitable donation deduction, including for charitable miles. And in good news, under the House proposal, the mileage rate for charity would finally be indexed for inflation (it’s been 14 cents per mile since the Clinton era).
Both proposals would continue to allow you to deduct business miles related to your trade or business (for more on the difference between a Schedule A and a Schedule C, click here).
Remember: These are the rates effective at the beginning of 2018 for the 2018 tax year. Assuming that they still apply to you, that means they’ll show up on your 2018 returns (the ones you’ll file in 2019). However, you can still use the 2017 standard mileage rates for the tax return that you’ll submit in 2018. Even if the tax reform bills eliminate certain deduction as of January 1, 2018, those deductions are still applicable for the 2017 tax year.
If you’re looking for 2017 tax rates, including the standard deduction and other tax items, you’ll find them here.