The Internal Revenue Service (IRS) announced the IRS mileage rate 2018 as early as last year. And now it’s time for car owners to max-out its benefits. In a nutshell, this rate refers to the amount you can use to deduct non-personal, vehicle-related expenses off your annual tax dues. These are the rates based on the recently passed Tax Cuts and Jobs Act of 2017. Get to know your applicable standard mileage rates.
In this guide:
- What Is The Standard IRS Mileage Rate?
- Who Are Affected by the IRS Mileage Rate 2018?
- Why Is It Important To Understand The IRS Mileage Rate Provisions?
- What Are The Standard IRS Mileage Rates 2018?
- How Is The IRS Mileage Rate 2018 Different From That In 2017?
- How Does One Compute Tax Deductions Based on the IRS Mileage Rate 2018 Provisions?
- When Does The IRS Mileage Rate 2018 Take Effect?
Things You Need To Know About IRS Mileage Rate 2018
1. What Is The Standard IRS Mileage Rate?
The IRS allows taxpayers to deduct expenses obtained from using vehicles off their annual tax dues. In determining the amount of deduction, taxpayers may calculate the actual costs of using their vehicle — a process that might be time-consuming for the taxpayers.
To make it easier for taxpayers, the government annually publishes a guide — the standard IRS mileage rate — to help them compute the necessary vehicle-related deductions.
However, the IRS still allows taxpayers to calculate actual costs of using their vehicle than to use the assigned standard mileage rates. No computation would be required, but you would need to file your receipts and keep proper expense records.
2. Who Are Affected by the IRS Mileage Rate 2018?
The IRS mileage rate covers taxpayers — whether employees, self-employed, or businesses — who use their vehicles for non-personal use. The applicable rates would vary based on how they use their vehicle.
3. Why Is It Important To Understand The IRS Mileage Rate Provisions?
The IRS issues mileage rates to help taxpayers compute the acceptable deductions for the use of vehicles for other than personal purposes. The deductible costs cover the operations of a vehicle — either a car, van, pickup truck, or panel truck — for the following purposes:
- business – traveling from one location to another, visiting customers, attending business meetings
- charitable – rendering transportation services to charitable organizations
As per IRS Notice 2018-03, originally included in this list of deductibles are moving expenses. However, with the passage of the Tax Cuts and Jobs Act (TCJA), this item has been removed from the coverage.
The TCJA also removed unreimbursed business expenses from the IRS mileage coverage until 2025. Exempted from this, however, are the following employees:
- US armed forces reserves
- government workers paid on a fee basis
- performing artists
4. What Are The Standard IRS Mileage Rates for 2018?
According to the IRS, the standard mileage rates for vehicle use are the following:
- 54.5 cents for every mile of vehicles used for business travel
- 18 cents for every mile of vehicles for medical use
- 14 cents for every mile of vehicles that serve charitable groups and institutions
5. How Is The IRS Mileage Rate 2018 Different From That In 2017?
The mileage rates for business, medical, and moving use of vehicle increased by 1 cent per mile compared to the 2017 rate. Meanwhile, the mileage rate for charitable use of business vehicle remains unchanged.
Why set these particular rates? The IRS based the standard mileage rate for business use of a vehicle on their assessment of the fixed and variable expenses in using a vehicle. As for the standard mileage rate for medical and moving use of vehicle, IRS based the rate the variable expense.
6. How Does One Compute Tax Deductions Based on the IRS Mileage Rate 2018?
In computing tax deductions based on the IRS mileage rate, taxpayers may follow these simple steps:
- Identify the mileage percentage applicable to your business. For example, if half your driving mileage (say, 10,000 miles) is allotted for business, then multiply this by 50% (so, 10,000 miles X .50 = 5,000 business mileage)
- Multiply the business mileage with the percentage in the IRS mileage rate. Given the example above, 5,000 business miles X $0.545 IRS mileage rate = $2,725 tax deduction from vehicle-use expenses
7. When Does The IRS Mileage Rate 2018 Take Effect?
The IRS mileage rate 2018 takes effect January 1, 2018.
For those who use vehicles for business/charitable/medical purposes, make sure to take note of the IRS mileage rate 2018. You’ll want to take advantage of the government’s standard mileage rate to claim deductions for non-personal use of your vehicle.
Do you have experiences with the IRS Mileage Rate 2018 that you would like to share? Tell us about this in the comments section below.