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► IRS Releases 2020 Standard Mileage Rates, FAVR Allowances

The Internal Revenue Service (IRS) has released its inflation-adjusted standard mileage allowances for 2020, as well as maximum vehicle value thresholds to be used in calculating fixed and variable rate (FAVR) allowances.

For all miles of business use, the standard mileage rate for transportation or travel expenses is 57.5 cents per mile (down slightly from 58 cents in 2019), according to IRS Notice 2020-05. The standard rate is 14 cents per mile (same as last year) if an automobile is used to render gratuitous services to a charitable organization, or 17 cents if used for medical care or a deductible move (a 3-cent decrease from 2019).

For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 24 cents per mile for 2016, 25 cents per mile for 2017, 25 cents per mile for 2018, 26 cents per mile for 2019, and 27 cents per mile for 2020.

The rate revisions reflect fluctuations in costs related to driving, such as gasoline and auto insurance, as well as changes in vehicles’ depreciation rate.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than the standard mileage rates. IRS Revenue Procedure 2010-51 provides the rules for computing the deductible costs of operating an automobile for business, charitable, medical, or relocation expenses; and for substantiating the expenses.

Effect of TCJA

Unreimbursed employee travel expenses were among the miscellaneous itemized deductions suspended for tax years 2018 through 2025 by the Tax Cuts and Jobs Act (TCJA) of 2017. As a result, the business standard mileage rate provided in this notice cannot be used to claim an itemized deduction for unreimbursed employee travel expenses during the suspension.

However, the IRS noted, deductions were not suspended for expenses that are deductible in determining adjusted gross income. For example, members of a reserve component of the military, state or local government officials paid on a fee basis, and certain performing artists may continue using the standard rate to deduct unreimbursed employee travel expenses as an adjustment to total income.

The TCJA also suspended the moving expense exclusion and deduction for all except certain military personnel.

FAVR Allowances

The FAVR allowances apply to so-called “Runzheimer plans” for reimbursing employees’ use of their own or leased vehicles to conduct company business. Named for the company that markets many of these plans, Runzheimer plans allow employers to reimburse employees for the use of their cars with a fixed periodic payment, plus a periodic cents-per-mile allowance.

For purposes of computing the allowance under a FAVR plan, the maximum allowable cost in 2020 is $50,400 for cars, trucks, and vans, the same as in 2019. The allowance for 2018 originally had been $27,300 for cars and $31,000 for trucks and vans, but the TCJA raised this amount to $50,000, as reflected in IRS Notice 2018-42.

[2/2020]

 

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