What Does the Standard Mileage Rate Cover?

The standard mileage rate provides a simplified method for individuals and businesses to account for vehicle operating costs. Established annually by the Internal Revenue Service (IRS), this rate allows taxpayers to deduct a set amount per mile driven instead of tracking every expense. Its purpose is to streamline claiming deductions for vehicle use, considering various costs without requiring detailed record-keeping.

Expenses Included in the Standard Rate

The standard mileage rate covers typical vehicle operating expenses. These include variable costs such as fuel and oil, and maintenance and repair costs.

Beyond these variable expenses, the rate incorporates fixed costs associated with vehicle ownership. Depreciation, the decrease in a vehicle’s value over time, is a significant component. For leased vehicles, the rate covers the equivalent of lease payments. Vehicle insurance premiums and registration fees are also included. This all-inclusive approach simplifies expense tracking, as taxpayers do not need to itemize these specific costs.

Expenses Excluded from the Standard Rate

While the standard mileage rate covers many direct operating and ownership costs, certain vehicle-related expenses are excluded. These specific costs can often be deducted separately, even when using the standard mileage rate method. Parking fees and tolls incurred during qualifying travel are common examples of expenses not built into the per-mile rate. Taxpayers can deduct these amounts in addition to their mileage deduction.

Interest paid on a car loan is not included in the standard mileage rate. State and local personal property taxes assessed on the vehicle are similarly excluded from the rate’s coverage. These items are distinct financial obligations.

Types of Standard Mileage Rates

The IRS publishes different standard mileage rates each year, tailored to various types of qualifying travel. These rates reflect distinct cost considerations for different purposes. The business mileage rate is typically the highest, accounting for both fixed and variable costs associated with operating a vehicle for business activities. This rate is used by self-employed individuals and those who use their personal vehicles for work-related travel.

Separate rates are established for medical and moving expenses. The medical mileage rate applies to travel for medical care, such as doctor visits or hospital trips. The moving expense rate, while largely suspended for most taxpayers, remains available for qualified active-duty military members relocating due to a permanent change of station. These medical and moving rates are primarily based on the variable costs of driving. A distinct rate is also provided for charitable mileage, which applies to individuals driving for volunteer work for qualified charitable organizations.