IRS Releases Mileage Rates for the 2021 Tax Year
The IRS has issued its 2021 standard mileage rates. Beginning on January 1, 2021, the standard mileage rates for the use of a car, van, pickup, or panel truck will be:
- 56 cents per mile for business miles driven (down from 57.5 cents in 2020)
- 16 cents per mile driven for medical or moving purposes (down from 17 cents in 2020)
- 14 cents per mile driven in service of charitable organizations (currently fixed by Congress)
You can find these official rates and more in IRS Notice 2021-02.
If you’re wondering why the rates differ for business and medical or moving purposes, there is a reason. The standard mileage rate for business is calculated by using an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil. In contrast, the rate for medical and moving purposes is based just on the variable costs.
As for the charitable mileage rate? If you feel like it always looks the same, it has: by statute, it is not indexed for inflation or otherwise adjusted (it’s been 14 cents per mile since the Clinton era).
Standard mileage rates are used to calculate the deductible amount for business, moving, medical, or charitable expenses (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 more than one purpose, keep appropriate records and subtract the cost of personal travel. You may also use more than one rate on your tax return. Let’s say, for example, that you drive 20,000 miles in 2021. Of those miles, 10,000 are for personal use, 2,000 are for charitable purposes, and 8,000 are for medical purposes. You would calculate your deduction as follows:
10,000 personal miles x 0 = 0
2,000 charitable miles x .14 = $280
8,000 medical miles x .17 = $1,360
In this example, your total deductible mileage-related expenses would be $1,640, plus any related charges such as parking fees and tolls. You would report your charitable and medical mileage deductions on the applicable lines on Schedule A. Keep in mind that medical miles are still subject to the medical expense floor; fortunately, Congress just lowered the threshold to 7.5% permanently (it was slated to go back up to 10% otherwise).
What about business mileage? Following tax reform, taxpayers can no longer claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. That deduction was eliminated from Schedule A, along with similar deductions like the home office deduction. This does not affect deductions correctly claimed on Schedule C by self-employed individuals, freelancers, and independent contractors.
Similarly, most taxpayers can no longer deduct moving expenses. However, an exception applies to members of the Armed Forces on active duty moving under orders to a permanent change of station.
If these rates don’t adequately reflect your costs, you have the option of deducting actual expenses rather than using the standard mileage rates—though admittedly, that’s a lot more work.
One more thing: these are the rates for the 2021 tax year for the return you’ll file in 2022. You’ll use the 2020 standard mileage rates for the tax return that you’ll submit in 2021.
