Looks like it is time to update policies, cost estimate calculators and employee expectations.
The IRS recently sent out a notice that provides the optional 2020 standard mileage rates for taxpayers to use in computing their deductible costs of operating/driving an automobile for business, charitable, medical or moving expense (relocation) purposes. For the full notice, read it here.
Effective Jan. 1, the rate for mileage reimbursement is $0.575 per mile, down a half cent from 2019’s $0.58 per mile rate. Last year's rate was up 3.5 cents from 2018. The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. That study includes depreciation, insurance, repairs, tires, maintenance, gas and oil.
Prior to enactment of the Tax Cuts and Job Act, relocating employees could deduct a portion of the reimbursement. However, the ability to claim a miscellaneous itemized deduction was suspended with the act until Jan. 1, 2026. The full reimbursement is considered taxable now that the law repealed the exclusion.
Global mobility programs that use the standard mileage rates for 2020 should update policies and any forms or calculators used to process expense submissions.
Need a reminder on how the tax reform impacted relocation expenses? Try one of these:
IR-2019-215, December 31, 2019 WASHINGTON — The Internal Revenue Service today issued the 2020 optional standard mileage rates (PDF) used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on January 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: