IRS Mileage Rate 2021 is going to be adjusted by the Internal Revenue Service. The mileage rate is used for giving a reference point to employers and to those who are claiming a deduction for their mileage expenses.
The mileage rate is important because it is used for many things. Any increase or decrease in the rates could mean a lot when added up over time.
For example, if you’re self-employed claiming a deduction for your business mileage expenses based on the standard mileage rate, a 1 cent increase could mean $1 for every 100 miles driven. With that said, you should keep up with the mileage rate updates for the 2021 so you know the deduction you’re qualified to claim.
Mileage Rate for Business
The mileage rate is divided into three separate categories. The most commonly searched mileage rate is for business use. If you’re running a business, you can deduct your mileage expenses based on the business mileage rate.
In addition to self-employed individuals, employees can figure out their maximum reimbursement for their mileage. As of now, the IRS hasn’t announced the business mileage rate for the 2021 tax year. Once the business mileage rate is set, we will keep you updated.
Note: Employees who are using their personal vehicles for business purposes no longer qualify for a tax deduction. This became effective after the TCJA of 2017.
Medical and Charity
Driving your vehicle for medical reasons such as transportation qualify for a tax deduction. Although the medical mileage rate is significantly lower than the business mileage rate, the number of miles driven can add up to a hefty deduction.
To claim the medical mileage deduction based on the standard mileage rate, you must multiply the number of miles driven with the medical mileage rate. We expect the mileage rate to remain the same as it is for 2021 at 18 cents per mile.
On the other hand, the charity mileage rate is fixed by Congress. It is 14 cents per mile driven. If you volunteered for a charitable organization and driven your personal vehicle for services, you can deduct the mileage expenses.
Given it costs about 40 cents per mile to operate a vehicle on average, 14 cents is surely not enough. If you’ve driven many miles in service of a charitable organization or for medical, you may want to opt to deduct your actual expenses rather than claiming a deduction based on the 2021 mileage rate.