Standard Mileage Rate Deduction Increased for 2018

The IRS released the 2018 optional use standard mileage rates used in the calculation of deductible costs in operation of an automobile. This deduction applies to vehicles in the operation for business, medical, moving and charitable purposes. Beginning January 1, 2018, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

• 54.5 cents per mile for business miles driven (up from 53.5 cents in 2017);

• 18 cents per mile for medical and moving expenses (up from 17 cents in 2017); and

• 14 cents per mile for miles driven for charitable purposes (permanently set by statute at 14 cents).

The Tax Cuts and Jobs Act (HR1) indexes for inflation the rate for charitable miles. The bill also repealed the mileage deduction for moving expenses (with limited exceptions). The change is to be effective for the 2018 tax year claimed in 2019. The rules for 2017 taxes to be filed this April still remain as they were.

A taxpayer may not use the business standard mileage rate after using depreciation methods under Code Sec. 168 or after claiming the Code Sec. 179 deduction for that vehicle. A taxpayer may not use the business rate for more than four vehicles at a time. Proper use of the business standard mileage rate is optional and takes the place of all operating fixed costs of the automobile allocable to business use, such as depreciation, maintenance and repairs, tires gasoline, oil, insurance, and license and registration fees.

For automobiles used for business, the taxpayer MUST use .25 cents per mile as the portion of the standard mileage rate treated as depreciation for 2018. For prior years the rate fluctuates depending on the inflation index established and interpreted by the IRS. To compute the allowance under a fixed and variable rate plan for 2018, the standard automobile cost may not exceed $27,300 for cars or $31,000 for trucks and vans.