Standard Mileage Rates for 2018 Increase Slightly

(Parker Tax Publishing January 2018)

The IRS issued the 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes. The IRS also issued the amount taxpayers must use in calculating reductions to a vehicle's basis for depreciation taken under the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate plan. Notice 2018-3.

Beginning on January 1, 2018, Notice 2018-3 provides that the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

(1) 54.5 cents per mile driven for business purposes;

(2) 18 cents per mile driven for medical or moving purposes; and

(3) 14 cents per mile driven in service of charitable organizations.

Both the business rate and the medical and moving expense rate increased 1 cent from the 2017 rates. The charitable rate is a fixed statutory amount that does not change from year to year.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System or after claiming a Code Sec. 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are provided in Rev. Proc. 2010-51.

Notice 2018-3 also contains the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan. For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 23 cents per mile for 2014, 22 cents per mile for 2015, 24 cents per mile for 2016, 24 cents per mile for 2017, and 25 cents per mile for 2018.

Finally, for purposes of computing the allowance under a fixed and variable rate plan, Notice 2018-3 provides that the standard automobile cost may not exceed $27,300 for automobiles (excluding trucks and vans) or $31,000 for trucks and vans.

For a discussion of the rules relating to the use of the standard mileage rate, see Parker Tax ¶91,110.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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