Higher gas prices have one silver lining: a higher IRS mileage deduction standard rate.
Every year, the IRS updates the standard amount one can deduct for each mile driven for business or miles driven for charitable purposes. The amount of the IRS standard mileage rates deduction is based upon various different factors, but the price of gasoline figures most prominently into the change each year. (Things like depreciation, and wear and tear, are included, but don’t vary much from year to year.)
2018 Standard IRS Mileage Reimbursement Rate
Rising gas prices means that the standard mileage rate deduction for 2018 is higher, and since many companies use the same IRS number as their mileage rate allowance, a lot of those will be higher too.
The IRS rate per mile for business miles driven is 54.5 cents per mile, up from 53.5 cents per mile in 2017.
The IRS standard mileage rate for medical purpose, or for miles driven while moving is 18 cents per mile, which is also up a penny per mile from the 2017 mileage rate.
The mileage deduction rate for miles driven for charity is 14 cents per mile, which is the same as 2017.
Standard Mileage Rate Amount Tax Deduction
Remember, you may only deduct miles driven for business purposes that are not reimbursed by your employer. Although your employer is not required to use the IRS standard deduction per mile, most companies do for easier compliance. Also, remember that miles you drive commuting back and forth from your job are not tax deductible at all. However, if you are a 1099 employee (contract, non-W2 employee) you may be eligible to deduct such mileage as a business expense.
The IRS standard mileage rate for miles driven in service of charitable organizations is 14 cents per mile for 2017 and 2018. Again, if you are reimbursed in anyway, you may not deduct your mileage. However, if you drive in order to do something for a charitable organization, it can be deducted, essentially as a donation to the organization. The standard rules for who does, and does not, count as a charitable organization apply.
Finally, you can deduct 18 cents per mile for mileage driven for medical or moving purposes. The rules for deducting medical expenses and moving expenses apply. So, determine whether you qualify for the deduction first, before worrying about the miles. In both cases, there is a not insignificant minimum floor of expenses required before you are entitled to any deduction, so driving your kids to the pediatrician once per year probably won’t be big enough to get deducted.
How To Deduct Mileage Using the Standard Mileage Deduction Amount
Once you have determined that your driven miles are deductible, you’ll need to keep records of all deductible miles driven. The IRS requires “contemporaneous records,” which means you need to somehow log your mileage deduction miles driven as you drive them. The best practice is to log each trip with a date, purpose, starting point and destination, and starting and ending odometer reading, although that isn’t strictly necessary. Some people keep a little mileage deduction log book in their car. Others use an app on their phone.
Whatever you use, be sure that you can export the data and keep it with your tax papers for the next three years. Don’t make the mistake of assuming you can get back into an app or online log three years from now.
Deducting Miles Driven Without the Standard Mileage Rate
Of course, you do not have to use the standard mileage deduction rate. You may deduct the actual cost of operating your vehicle for business, charity, medical, or moving purposes. However, this requires detailed records, and receipts for things like vehicle maintenance such as oil changes and repairs.
Also, if you deduct the cost of a vehicle using a Section 179 deduction or with the Modified Accelerated Cost Recovery System (MACRS), you may not use the standard mileage deduction amount for 2018, or any year as a deduction.