For only the second time in a decade, the IRS has reduced the amount drivers can deduct when they drive for work. Beginning January 1, 2021, the standard mileage rate for business use of a passenger vehicle will fall to 56 cents per mile—down from 57.5 in 2020.
The mileage rate members of the armed forces can deduct for medical or moving also drops, now just 16 cents per mile.
The changes aren’t arbitrary. The IRS conducts an annual study of how much it costs Americans to operate a vehicle. The latest study found that improving fuel efficiency, slowing vehicle depreciation rates, and reduced demand for gasoline caused by COVID-19-related shutdowns have all made it less expensive for Americans to drive.
