2021 Standard Mileage Rates

2021 Standard Mileage Rates

Notice 2021-02

SECTION 1. PURPOSE

This notice provides the optional 2021 standard mileage rates for taxpayers to

use in computing the deductible costs of operating an automobile for business,

charitable, medical, or moving expense purposes. This notice also provides the amount

taxpayers must use in calculating reductions to basis for depreciation taken under the

business standard mileage rate, and the maximum standard automobile cost that may

be used in computing the allowance under a fixed and variable rate (FAVR) plan.

Additionally, this notice provides the maximum fair market value (FMV) of employer-

provided automobiles first made available to employees for personal use in calendar

year 2021 for which employers may use the fleet-average valuation rule in § 1.61-

21(d)(5)(v) of the Income Tax Regulations or the vehicle cents-per-mile valuation rule in

§ 1.61-21(e).

SECTION 2. BACKGROUND

Rev. Proc. 2019-46, 2019-49 I.R.B. 1301, provides rules for computing the

deductible costs of operating an automobile for business, charitable, medical, or moving

expense purposes, and for substantiating, under § 274(d) of the Internal Revenue Code

and § 1.274-5, the amount of ordinary and necessary business expenses of local

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transportation or travel away from home. Taxpayers using the standard mileage rates

must comply with Rev. Proc. 2019-46. However, a taxpayer is not required to use the

substantiation methods described in Rev. Proc. 2019-46, but instead may substantiate

using actual allowable expense amounts if the taxpayer maintains adequate records or

other sufficient evidence.

An independent contractor conducts an annual study for the Internal Revenue

Service of the fixed and variable costs of operating an automobile to determine the

standard mileage rates for business, medical, and moving use reflected in this notice.

The standard mileage rate for charitable use is set by § 170(i)

amounts if the taxpayer maintains adequate records or

other sufficient evidence.

An independent contractor conducts an annual study for the Internal Revenue

Service of the fixed and variable costs of operating an automobile to determine the

standard mileage rates for business, medical, and moving use reflected in this notice.

The standard mileage rate for charitable use is set by § 170(i).

Longstanding regulations under § 61 provide special valuation rules for

employer-provided automobiles. The amount that must be included in the employee’s

income and wages for the personal use of an employer-provided automobile generally

is determined by reference to the automobile’s FMV. If an employer chooses to use a

special valuation rule, the special value is treated as the FMV of the benefit for income

tax and employment tax purposes. Section 1.61-21(b)(4). Two such special valuation

rules, the fleet-average valuation rule and the vehicle cents-per-mile valuation rule, are

set forth in § 1.61-21(d)(5)(v) and § 1.61-21(e), respectively. These two special

valuation rules are subject to limitations, including that they may be used only in

connection with automobiles having values that do not exceed a maximum amount set

forth in the regulations.

SECTION 3. STANDARD MILEAGE RATES

The standard mileage rate for transportation or travel expenses is 56 cents per

mile for all miles of business use (business standard mileage rate). See section 4 of

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Rev. Proc. 2019-46. However, § 11045 of the Tax Cuts and Jobs Act, Public Law 115-

97, 131. Stat. 2054 (December 22, 2017) (the “TCJA”) suspends all miscellaneous

itemized deductions that are subject to the two-percent of adjusted gross income floor

under § 67, including unreimbursed employee travel expenses, for taxable years

beginning after December 31, 2017, and before January 1, 2026

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Rev. Proc. 2019-46. However, § 11045 of the Tax Cuts and Jobs Act, Public Law 115-

97, 131. Stat. 2054 (December 22, 2017) (the “TCJA”) suspends all miscellaneous

itemized deductions that are subject to the two-percent of adjusted gross income floor

under § 67, including unreimbursed employee travel expenses, for taxable years

beginning after December 31, 2017, and before January 1, 2026. Thus, the business

standard mileage rate provided in this notice cannot be used to claim an itemized

deduction for unreimbursed employee travel expenses during the suspension.

Notwithstanding the foregoing suspension of miscellaneous itemized deductions,

deductions for expenses that are deductible in determining adjusted gross income are

not suspended. For example, members of a reserve component of the Armed Forces of

the United States (Armed Forces), state or local government officials paid on a fee

basis, and certain performing artists are entitled to deduct unreimbursed employee

travel expenses as an adjustment to total income on line 11 of Schedule 1 of Form 1040

(2020), not as an itemized deduction on Schedule A of Form 1040 (2020), and therefore

may continue to use the business standard mileage rate.

The standard mileage rate is 14 cents per mile for use of an automobile in

rendering gratuitous services to a charitable organization under § 170. See section 5 of

Rev. Proc. 2019-46.

The standard mileage rate is 16 cents per mile for use of an automobile: (1) for

medical care described in § 213; or (2) as part of a move for which the expenses are

deductible under § 217(g). See section 5 of Rev. Proc. 2019-46. Section 11049 of the

TCJA suspends the deduction for moving expenses for taxable years beginning after

December 31, 2017, and before January 1, 2026. However, the suspension does not

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apply to members of the Armed Forces on active duty who move pursuant to a military

order and incident to a permanent change of station

deductible under § 217(g). See section 5 of Rev. Proc. 2019-46. Section 11049 of the

TCJA suspends the deduction for moving expenses for taxable years beginning after

December 31, 2017, and before January 1, 2026. However, the suspension does not

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apply to members of the Armed Forces on active duty who move pursuant to a military

order and incident to a permanent change of station. Thus, except for taxpayers to

whom § 217(g) applies, the standard mileage rate provided in this notice is not

applicable for the use of an automobile as part of a move occurring during the

suspension.

SECTION 4. BASIS REDUCTION AMOUNT

For automobiles a taxpayer uses for business purposes, the portion of the

business standard mileage rate treated as depreciation is 25 cents per mile for 2017, 25

cents per mile for 2018, 26 cents per mile for 2019, 27 cents per mile for 2020, and 26

cents per mile for 2021. See section 4.04 of Rev. Proc. 2019-46.

SECTION 5. MAXIMUM STANDARD AUTOMOBILE COST

For purposes of computing the allowance under a FAVR plan, the standard

automobile cost may not exceed $51,100 for automobiles (including trucks and vans).

See section 6.02(6) of Rev. Proc. 2019-46.

SECTION 6. MAXIMUM VALUE OF EMPLOYER-PROVIDED AUTOMOBILES

For purposes of the fleet-average valuation rule in § 1.61-21(d)(5)(v) and the

vehicle cents-per-mile valuation rule in § 1.61-21(e), the maximum FMV of automobiles

(including trucks and vans) first made available to employees in calendar year 2021 is

$51,100.

SECTION 7. EFFECTIVE DATE

This notice is effective for: (1) deductible transportation expenses paid or

incurred on or after January 1, 2021; (2) mileage allowances or reimbursements paid to

a charitable volunteer or a member of the Armed Forces to whom § 217(g) applies: (a)

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on or after January 1, 2021, and (b) for transportation expenses the charitable volunteer

or such member of the Armed Forces pays or incurs on or after January 1, 2021; and

eductible transportation expenses paid or

incurred on or after January 1, 2021; (2) mileage allowances or reimbursements paid to

a charitable volunteer or a member of the Armed Forces to whom § 217(g) applies: (a)

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on or after January 1, 2021, and (b) for transportation expenses the charitable volunteer

or such member of the Armed Forces pays or incurs on or after January 1, 2021; and

(3) for purposes of the maximum FMV of employer-provided automobiles for which

employers may use the fleet-average valuation rule in §1.61-21(d)(5)(v) or the vehicle

cents-per-mile rule in §1.61-21(e), automobiles first made available to employees for

personal use on or after January 1, 2021.

SECTION 8. EFFECT ON OTHER DOCUMENTS

Notice 2020-05 is superseded.

DRAFTING INFORMATION

The principal author of this notice is Anna Gleysteen of the Office of Associate

Chief Counsel (Income Tax and Accounting). For further information on this notice

regarding the use of an employee-provided automobile, contact Ms. Gleysteen at (202)

317-7007 (not a toll-free number). For further information on this notice regarding the

use of an employer-provided automobile, contact Stephanie Caden of the Office of

Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment

Taxes), at (202) 317-4774 (not a toll-free number).