What’s the standard mileage rate and how does it work?

This article was fact-checked by our editors and reviewed by Tolla Tu, tax specialist with Credit Karma. It has been updated for the 2020 tax year.

Owning and operating a vehicle isn’t cheap — the average cost to keep rolling is $9,282 per year, according to a 2019 study by AAA.

Depending on the type of vehicle you own, your annual costs to drive 15,000 miles per year could vary substantially — from a high of $10,839 for a pickup truck to a low of $7,114 for a small sedan, AAA reports. Wouldn’t it be great to recoup some of the money you spend every year on gas, maintenance, repairs, insurance and other vehicle-related expenses?

If you meet certain qualifications, you might be able to take a driving-related tax deduction for using a car or other vehicle. The standard mileage rate for 2020 can help you calculate how much you may be able to deduct when you file your 2020 federal income taxes next year.

But not everyone can deduct vehicle-related expenses, and even if you’re qualified for a vehicle-related tax break, you may need to itemize to take the deduction. Here’s what you need to know about the standard mileage rate and how it can affect your tax obligation.

• Standard mileage rate defined
• Who can use the standard mileage rate?
• Taking a deduction for mileage

Standard mileage rate defined

The standard mileage rate is a set amount of cents per mile that qualifying taxpayers can use to calculate a mileage-related deduction from their federal income tax. Every year, the IRS sets standard mileage rates for using your car for business, charitable, medical and moving purposes. If you qualify for the deduction, you have the option to calculate the deduction based on the actual costs of using your vehicle or by using the standard mileage deduction method.

Different purposes have different rates, and each rate is calculated differently.

For example, the business mileage rate is based on an annual study of the fixed and variable costs of using a car, while the mileage rate for medical and moving purposes is based on only the variable costs. Federal law determines the charitable mileage rate, which you only can deduct for unreimbursed out-of-pocket expenses related to using your car while doing charity work for a charitable organization.

Here’s a look at standard mileage rates for 2019 and 2020.

Who can use the standard mileage rate?

Not everyone with vehicle-related expenses will be able to use the standard mileage rate to take a tax deduction. You’re only eligible for it under very specific circumstances.

Business

If you use your car to drive for business purposes, you may be able to deduct some vehicle-related expenses. You can either calculate your deduction based on actual expenses or use the business standard-mileage rate.

Businesses or self-employed people who use their vehicle for business may be able to take this deduction. If you’re an employee traveling for business and your employer doesn’t reimburse you for your travel expenses, you can’t claim an itemized deduction for unreimbursed employee expenses, including business travel costs.

Other rules apply to when and how a business person can take this deduction. IRS Publication 535 has more information about deducting business expenses.

Medical

When you use a car for medical reasons, like driving to or from a doctor’s office or hospital for necessary medical care, you may be able to take a vehicle-related deduction. You can either track and deduct actual out-of-pocket costs for expenses like gas and oil, or you can use the standard medical-mileage rate to calculate your deduction.

But remember — you can only deduct medical mileage if you take a medical-expense deduction, and you can only deduct medical expenses that exceed 7.5% of your adjusted gross income.

IRS Publication 502 has more information about deducting medical and dental expenses.

Charity

If you used your car to volunteer with charitable organizations, you may be able to take a vehicle-related deduction. You can either use your actual expenses, like the cost of gas, to calculate your deduction, or use the charitable mileage rate.

IRS Publication 526 has more information on deducting charitable contributions.

Moving

If you’re an active-duty member of the military and you moved due to a military order or permanent change of station, you may be able to deduct certain expenses related to your move. If you used a car, van, pickup or panel truck to move, you may be able to use the standard mileage rate for military purposes to calculate a deduction.

The moving expense deduction is only available for active members of the U.S. armed forces. Tax reform suspended the deduction for everyone else for tax years between Dec. 31, 2017, and Jan. 1, 2026.

Taking a deduction for mileage

Individual filers use Form 1040 to file their federal income taxes, but any additional forms you need to take a mileage-related deduction will depend on the purpose of the deduction — and your individual tax situation.

For example, if you’re taking a mileage deduction related to volunteer work for a qualified charity, your charitable deduction would be reported on Schedule A as part of your itemized deductions. You would use the same form if you’re claiming a medical-expense deduction.

But if you’re self-employed, you would take a business deduction on Schedule C — Profit or Loss From Business.

Bottom line

The standard mileage rate can help qualified filers who itemize their deductions reduce their tax obligation. If you qualify to take a vehicle-related deduction, remember that you can either use the standard mileage rate or base your calculations on your actual costs. It may make sense to calculate your deduction both ways to see which one will give you the greater tax benefit.

A tax specialist with Credit Karma, Tolla Tu has international experience in accounting, tax, finance, banking and consulting. She holds a bachelor’s degree in financial management from Beijing University of Chemical Technology, a master’s in corporate finance from Central University of Finance and Economics as well as a Master of Professional Accountancy from Montana State University. You can find her on LinkedIn.