IRS Standard Mileage Rates
Each year the IRS updates the mileage reimbursement rates. Effective January 1, 2018, the standard mileage reimbursement rate for the use of a car, van, pick-up, or panel truck in connection with a business will be 54.5 cents per mile. For medical treatment or moving expenses related to a job relocation, the reimbursement rate is 18 cents per mile. Miles driven in service of charitable organizations will be reimbursed at 14 cents per mile.
Who Can Use These Reimbursement Rates?
The tax code allows taxpayers to deduct ordinary and necessary expenses related to their business, which includes the cost of operating a vehicle. Any miles driven for personal use (even if the car is owned by the company) are not deductible. For example, Jeff is a doctor living in one city and has 3 offices in neighboring cities. Every day Jeff has to drive between those three offices to see patients. He can deduct the miles driven between those offices as a business expense.
Another common example is that of a business that offers some type of product for delivery and owns a vehicle that is exclusively used for the purpose of making deliveries or transporting goods in connection with the business. Miles driven for medical treatment may also be deducted. For example, Sara is a cancer patient who must travel 35 miles each week for treatment. The miles driven to and from her home to the facility where she receives her treatment are deductible. Other people who can deduct mileage are those who move to another city for a job or volunteer with charitable organizations.
Certain people can not use the standard mileage reimbursement rate. Those operating their businesses as corporations can not claim the vehicle as a corporate expense. Vehicles that are for hire, such as taxis, can not use the standard mileage reimbursement rate as well. If a person uses five or more cars at the same time in his business, then he is not eligible to use the standard mileage reimbursement rates.
The Importance of Keeping Records
It is absolutely necessary to keep a mileage log of miles driven during the year. If an individual is audited by the IRS, they will ask to see a log or record of the miles claimed as deductible on the tax return. Without a record or log of the miles driven, the IRS will disallow the mileage deduction. Even worse, the IRS will expand the audit and examine other areas that may not have been questionable.