The IRS announced that the business standard mileage rate for transportation expenses paid or incurred beginning January 1, 2020, will be 57.5 cents per mile, down 0.5 cents from 2019 [Notice 2020-05, 12-31-19].
The mileage rate may be used to compute the amount to reimburse employees who are using their own cars for business purposes. It may also be used by employers that elect to use the “cents-per-mile” valuation method for purposes of determining the amount that needs to be imputed to an employee's income for personal use of certain company-owned or leased nonluxury vehicles (see The Payroll Source®, §3.2-2). However, it may not be used by employees in claiming a tax deduction for unreimbursed employee business expenses, since such deductions are suspended by the Tax Cuts and Jobs Act.
In addition, the 2020 standard rate for miles driven for medical or moving purposes will decrease to 17 cents per mile, down from the 20 cents-per-mile rate in effect during 2019. The standard mileage rate for operating a passenger car for charitable purposes, which is set by law, will stay at 14 cents per mile.
For vehicles put into service in 2020, the cents-per-mile valuation method can be used only if the vehicle does not have a fair market value of more than $50,400 (unchanged from 2019). For employer-provided vehicles under the fleet-average valuation rule, applicable to an employer with a fleet of 20 or more automobiles, the 2020 maximum value is $50,400 for an automobile (unchanged from 2019). Note: The fleet-average valuation rule may not be used if any of the automobiles in the employer’s fleet exceeds its maximum allowable value.
To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!
Jyme Mariani, Esq., is Managing Editor of Payroll Currently and Payroll Information Resources for the APA.