Glossary of Human Resources Management and Employee Benefit Terms
The federal mileage reimbursement is the amount you can deduct from your federal income taxes for the costs of operating your car, van, pickup, or panel truck for qualified business, charitable, medical, or moving purposes.
As the name suggests, the federal mileage reimbursement amount is based on the qualified miles that a vehicle is driven. The Internal Revenue Service (IRS) sets the rate per mile which can be deducted. The rate per mile is different for different types of qualified uses. It also rises or falls from year to year as the IRS measures changes in the costs of vehicle ownership and use.
The federal mileage reimbursement is often referred to as the standard mileage rate.
In recent years, tax reform has restricted the federal mileage reimbursement. Most people no longer qualify. For 2020, you can deduct:
Business mileage if you are self-employed
Mileage related to medical care if medical expenses exceed 10 percent of your adjusted gross income
Mileage driven while doing charity work
Mileage related to moving if you are an active-duty member of the military who’s required to move
In each category, there are detailed qualifications that not everyone will meet. Consult an experienced tax professional to determine if you qualify.
Also, keep in mind that you can’t deduct any miles that were driven for personal use, so you have to keep precise records.
For 2020, the federal mileage reimbursement rates are:
57.5 cents per mile for business use
17 cents per mile for medical or moving purposes
14 cents per mile for charity work
To calculate your deductible amount, simply multiply the number of qualified miles you traveled by the applicable rate. If you have qualified mileage in more than one category, such as charity work and medical travel, calculate them separately at the appropriate mileage rates and report both on your taxes.
In many cases, taxpayers also have the option of calculating the actual costs of using their vehicle rather than using the standard federal mileage reimbursement rates. Again, not everyone qualifies, so consult a tax expert.