IRS Issues 2019 Mileage Rates

On 14 December, 2018, the U.S. IRS provided new optional standard mileage rates for use of an automobile for business, charitable, medical, or moving purposes during 2019.  See Notice 2019-2, and Announcement IR-2018-251.  

The new business mileage rate is 58 cents per mile, up from 54.5 cents per mile in 2018.  The rate for medical and moving use is 20 cents per mile, up from 18 cents per mile in 2018. The rate for charitable use is set by statute, and remains at 14 cents per mile.

The Notice also covers the impact of changes made by the Tax Cuts and Jobs Act (TCJA) that affect deductions for automobile use.  The IRS had also noted these impacts in a Notice issued earlier in 2018, see Notice 2018-42.

  • Unreimbursed automobile costs are no longer deductible as miscellaneous itemized deductions, so the standard mileage rate is inapplicable.
  • The 20 cents per mile rate for use of a vehicle in moving is not applicable to most movers because moving expenses are no longer deductible, except for certain members of the active duty military.

The TCJA suspended the deductions for miscellaneous itemized deductions and moving expenses, through 2025. Previously, there was an allowance for an itemized deduction of miscellaneous business expenses by individuals, to the extent those expenses exceeded 2% of adjusted gross income.

Worldwide ERC® members with business travelers who are incurring unreimbursed travel costs, such as automobile use, will need to determine whether to supplement tax assistance to take account of those costs that are no longer deductible. Note that if a company does reimburse automobile costs at the standard rate of 58 cents per mile, those reimbursements remain not taxable.

Companies will also need to consider how to handle automobile use by employees who are moving. Although many will still choose to use the 20 cents per mile rate for reimbursement, those costs are now taxable and subject to gross-up.

The standard rates are based on an annual study of fixed and variable costs of operating an automobile conducted for the IRS by an independent contractor.  The rates for business and moving differ because the rate for business use includes fixed costs such as depreciation, which are not allowed as medical or moving deductions.  Both rates include variable expenses such as fuel.  Taxpayers are also allowed to deduct items such as parking and tolls in addition to the standard mileage rate.  

Use of the standard deduction rates is optional; taxpayers are always free to determine their own actual costs of operating a vehicle.  However, such costs must be substantiated through detailed records, while the use of the standard rates avoids any need to substantiate the underlying costs incurred, although taxpayers must still maintain records of the miles driven and the purpose of each trip.  

Some companies use mileage rates higher than the standard rates to reimburse business travelers.  In such cases, the excess amounts are treated as taxable wages, and are subject to withholding and payroll taxes.  Amounts up to the standard mileage rate are excluded from the income of the employee.  

How This Impacts Mobility

As noted, except for uniformed military, use of a car in moving is no longer deductible.  Companies will need to adjust their reimbursement policies accordingly and decide whether to use the standard rate or some other rate.  Similarly, unreimbursed travelers will no longer be able to deduct automobile expenses, and companies may want to re-examine their reimbursement policies as a result.

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