UPDATED JAN 06, 2021 • 3 MIN READ
As of January 1st, 2021, the mileage rates for cars (including vans, pickups, and panel trucks) are:
Here is the IRS's announcement of the 2021 mileage rates with a bit more information.
As of January 1st, 2021, the mileage rate for cars (including vans, pickups, and panel trucks) is $0.56 per mile driven for business.
Usually, when people talk about the mileage rate, they mean the business rate–for example when you drive your personal vehicle for business purposes and are reimbursed the costs. Depending on whether you’re an employee or self-employed the rate might even be different.
The IRS sets the ‘optional standard mileage rate’ each year, and it represents the ceiling for tax-deductible mileage.
As an employee, your employer can choose to reimburse you for the costs you incur when you use your vehicle for business. It's up to your employer to set the rate and the rules for reimbursement, but the IRS's standard rate is the limit for what is tax-deductible. If you're paid more per mile than the IRS standard rate, anything above it is considered taxable income.
If you're self-employed, you get to use the IRS's rate to deduct the costs of using your car for business.
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Beginning on Jan. 1, 2021, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) is:
If you're an employee (since the standard rates are optional) your employer can choose to use either a lower or higher one. Check the rates and rules with your employer before calculating reimbursements. Here’s our guide to mileage reimbursement for employees.
If you're self-employed, you have a few more options to calculate your mileage deductions.
Also, as part of the 2017 Tax Cuts and Jobs Act (TCJA), reimbursement for moving expenses is no longer considered tax-deductible for most (unless you are an active member of the US Armed Forces “moving under orders to a permanent change of station”), beginning in 2018. See the IRS’s notice of February 2019 for more information.
As self-employed or a business owner, you always have the option to calculate the actual costs of operating your vehicle for business – this is called the actual expenses method. Read more about it and the choice between the two methods on the IRS's website.
Apps are the go-to. By making use of your phone's GPS, you can easily track all your trips. They also store your information and generally allow you to classify each trip according to the rules set down by the IRS for adequate records (each might differ though). We've got you covered with a simple and easy-to-use app whether you use Android or iOS.
Other alternatives are keeping a paper mileage log (the IRS provides a template, but it's from before the digital age) or using a spreadsheet, for example, Microsoft's Excel or Google's Sheets. Whatever you do, be sure to check out which information you need to record for your records to be considered adequate.
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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for, legal, tax or accounting advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal, tax or accounting advisor.
